According to a recent report, credit card debt in the US has grown at its fastest pace in two decades. In the first quarter of this year, total credit card balances rose by more than 17% compared to a year ago, marking the largest annual increase in at least 20 years. The data, sourced from the US Federal Reserve, also reveals that the cost of revolving credit, which includes credit cards, has reached multi-decade highs. The average interest rate on new credit cards now stands at 20.82%, compared to just over 12% a decade ago.
As a result, Americans now hold a record amount of credit card debt, with nearly $988 billion owed, according to the Fed. Financial experts believe that the increasing debt is partly driven by high inflation, which has forced households to rely more heavily on credit cards to cover their monthly expenses.
Although inflation has cooled off since reaching a 40-year high of 9.1% in June 2022, it still remains a concern. In the first quarter of this year, inflation dropped to 5-6%, and in June, it stood at 3%. The Federal Reserve has responded to rising inflation by raising interest rates ten times in just over a year, bringing the federal funds rate to the current range of 5.00-5.25%, up from 1.75% a year ago.
Despite the slowing inflation, the Federal Reserve is expected to raise interest rates again this week. The continuous interest rate hikes from the central bank would only push borrowing costs even higher for credit card users, making it more challenging to pay off their debts.
The growing credit card debt in the US raises concerns about the sustainability of the current financial situation. As inflation remains a pressing issue and interest rates continue to rise, it becomes harder for consumers to manage their debt effectively.
It is important for individuals to be aware of their financial situation and take measures to reduce credit card debt. This may include budgeting, cutting unnecessary expenses, and seeking professional advice if necessary. Additionally, it is advisable to explore alternative methods of payment and borrowing, such as personal loans or alternative credit options, which may offer more favorable terms and interest rates.
In order to stay informed about the latest developments in the economy and finance, individuals can visit RT’s business section for more stories. It is crucial to understand the current economic climate and make informed financial decisions to effectively manage credit card debt and secure a stable financial future.
In conclusion, the surge in credit card debt in the US, coupled with rising interest rates, poses challenges for consumers. It is crucial to address and manage this debt responsibly to avoid financial distress.
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