Hard Times Leading to Exploding Credit Card Debt for Americans
Crushing inflation is leading millions of Americans to lean more heavily on their credit cards, leading to an explosion of accumulating debt.
KGVO News reached out to Wallet Hub legal and financial analyst Jill Gonzalez on Monday for the update.
“Right now U.S. consumers have started to return to bad habits when it comes to credit card debt,” said Gonzalez. “We saw record setting reduction at the start of the pandemic in 2020, but in 2021 we saw things kind of slip away from us, and I think we're going to continue to see that as we move forward with 2022 as well. Right now we're seeing about a $75 billion increase from quarter to quarter.”
Gonzalez said American families are rapidly sinking into deeper credit card debt.
“By now it looks like the average household credit card balance is around $9,000, and that is nearing this projected breaking point that we've seen in the past that essentially signifies a recession,” she said. “There is most likely a recession looming, probably in Q4 (the fourth quarter) of this year. So now is the time to really rein things in.”
Gonzalez said, despite the financial difficulties, the time is now to create some kind of emergency fund.
“Besides the obvious things like making a budget and sticking to it, now's the time to build an emergency fund,” he said. “We saw what happens when you don't have one during the recession. You really want that safety net of cash to fall back on, because then you won't be as likely to fall behind on your bills in the event of emergency expenses, or unplanned joblessness that we saw essentially for the past couple of years.”
Gonzalez said her organization has resources to assist families in their efforts to reduce credit card debt.
“There are credit card debt calculators out there which can do the work for you,” she said. “You put in how many credit cards you have, what your balance is on each and what your interest rate is on each and it can spit out what your monthly payment should be on each one of those credit cards. That I would say is really the easiest way to at least have a goal and try to reach it and stick with it. Wallet Hub does have credit card calculators for you to use for free.”
For example, you must make monthly payments of $295 to pay off your credit card balance of $6,000 in 24 months. Your total interest cost will be $1,088. This assumes you do not make any additional charges during this period.