(NewsNation) — Americans are racking up a mountain of credit card debt this year: The total balance for the second quarter comes in at $887 billion — a 13% increase from Q1, according to Lending Tree.
The news is a byproduct of the Federal Reserve having raised interest rates four times this year, which, coupled with record inflation, is causing more people to go deeper into debt.
The Fed’s approach to inflation has affected the financial health of millions of Americans — many of whom are using credit to pay for necessities such as groceries and gas.
Commuting back and forth from home to work, only buying necessities, and budgeting are just some of the practices consumers list as they try to cope with the newfound financial hardship.
It’s a pinch especially felt among credit card users: According to Lending Tree, the average consumer carries over $6,500 in credit card debt.
“It’s not the worst it’s ever been, but it’s on the way there,” Matt Schulz, chief credit analyst at Lending Tree, told NewsNation’s “Rush Hour” Tuesday.
Schulz also said current conditions are unprecedented.
“The average rate on a new credit card offer today is a little over 21%. It’s as high as it’s ever been and the really unfortunate thing is that it’s only going to keep going higher,” he said.
High inflation has an estimated two-thirds of consumers scaling back on discretionary spending — such as buying new electronics or clothing. Growing debt could soon impact many credit scores, cutting into those able to qualify for new homes or cars.
The vicious cycle of credit card debt is tough to break.
“I don’t want to get back in that hole because we were paying about a thousand dollars a month in interest,” Cody Rice-Velasquez, a credit card user, said on “Rush Hour” Tuesday.
“The best way to break the cycle of credit card debt is to have a little bit of extra savings on hand so you don’t have to pull out the credit card the next time you have a flat tire or you have to take the dog to the vet,” Shultz said.
And while many consumers intentionally use their credit cards in order to rack up miles and points, analysts say pay close attention, because rising rates means balances will balloon much faster.