The national average interest rate on credit cards is now at 25%. What could go wrong?
The latest data by the New York Federal Reserve reveals that American credit card debt has surged by 32 percent over the last two years, signaling a growing wave of economic distress across the country.
Total US credit card debt now stands at a record-breaking $1.05 Trillion.
This increase has led to a significant number of Americans carrying larger debt balances for extended periods, raising concerns about the financial stability of many households.
Bankrate’s recent surveys shed light on the severity of the situation:
- According to the “Chasing Rewards in Debt Survey,” 44 percent of credit cardholders now carry their balances month-to-month, a practice that leads to accruing substantial interest payments and increasing debt over time.
- Bankrate’s “2024 Emergency Savings Report” finds that 36 percent of U.S. adults have more credit card debt than emergency savings, leaving them vulnerable in the face of unexpected financial crises.
- The “Discretionary Spending Survey” reveals that 38 percent of U.S. adults are willing to go into debt for non-essential purchases this year, highlighting a troubling trend toward prioritizing immediate gratification over financial health.
These findings underscore a critical issue: a significant portion of Americans are not only incurring more debt but are also keeping it for longer durations.
The reality of this debt accumulation are far-reaching.
With consumer spending being the largest component of the U.S. Gross Domestic Product (GDP), the increasing reliance on credit for purchases poses a significant risk.
If the trend continues and leads to a decrease in consumer spending, the U.S. would face a severe recession.
The data indicates that if an individual with the average credit card balance were to make only minimum payments at the current average interest rate, they would remain in debt for over 18 years, accruing more than $9,500 in interest alone.
Contributing article: https://www.bankrate.com/finance/credit-cards/credit-card-debt-report/
