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Credit Card Debt Hits $1 Trillion Mark Amid ‘Nonstop’ Spending
BY PYMNTS | MAY 30, 2023
How high is America’s credit card debt? The answer varies from source to source.
Either way, it’s either more than or close to $1 trillion, according to a Tuesday (May 30) report by The Hill that examined consumers’ growing dependency on credit cards.
“In 2021, we saw people paying off a record amount of debt,” said Jill Gonzalez, a senior analyst at WalletHub, per the report. “People had been saving through 2020, without much to do.”
Last year was a different story, as inflation ate away at people’s savings and the Federal Reserve repeatedly increased interest rates, the report said. Against this backdrop, credit card debt surged by a record $86 billion in the closing quarter of 2022.
“The spending is really nonstop now,” said Gonzalez in the report. “We once thought of putting things on our credit card as frivolous spending, or a big purchase, a TV. Now, because of inflation, people are putting actual necessities, food, housing, on their credit card.”
The report also noted that the average credit card interest rate is 20.92%, compared to 16.65% last spring.
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“We’ve been tracking credit card rates since 1985, and these rates are the highest we’ve ever seen,” said Ted Rossman, a senior industry analyst at Bankrate.com, in the report. “The minimum payment math is pretty staggering.”
And as PYMNTS wrote Tuesday, these pressures apply to higher-income consumers as well as people on the lower side of the earnings spectrum.
Research found in the report “How Credit Insecurity Is Changing U.S. Consumers’ Borrowing Habits,” a PYMNTS and Sezzle collaboration, found that a large percentage of consumers are “credit marginalized.”
This means they’ve been rejected at least one time in the last 12 months when applying for credit products. Higher earners, or people who make more than $100,000 per year, are marginalized more than any other income group, the research found.
According to the report, 38% of higher earners fit within this designation, compared to 29% for consumers and households earning between $50,000 to $100,000 and roughly 33% of those earning less than $50,000 who have been marginalized.
Source: Pymnts
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