RICHMOND, Va. – Americans have hit a new high in credit card debt. The surge means their overall balance shot above $1 trillion for the first time.
While credit card balances are at historic highs, the New York Federal Reserve reports people are generally still paying their bills on time, at least for now. There are currently 70 million more credit card accounts open than before the pandemic, and it’s definitely making an impact on how families choose to spend.
The larger concern is credit cards are increasingly being used to pay down household bills.
Experts say that could be the reason why credit card debt for families nationwide is unprecedented at a record-setting $1 trillion dollars.
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CPA Howard Dvorkin, chairman of Debt.com, said the use of plastic is back up after consumers took a pandemic pause on spending.
“People are subsidizing their normal costs, their normal living expenses, using credit cards,” he said. “So, maybe things were great three years ago? But now with the inflated expenses for groceries and fuel and all the other expenses and travel, I have to say because the airports are very busy. They’re using the credit cards to pay for it.”
Other balances such as retail stores, consumer loans, and car loans are added to what the household balance sheet owes and also add to families’ financial frustration.
A recent Debt.Com survey reports Americans who admit feeling stressed after using credit cards is up 15 percent from last year.
When you add in elevated interest rates, paying off debt becomes more expensive. Bankrate reports the average credit card charges more than 20 percent interest.
The federal government is in the same boat with the Congressional Budget Office projecting the national debt to be nearly twice as large as the entire U.S. economy in 30 years.
Congress could slow that trend by cutting spending. One suggestion from the CBO, however, mentions limiting Social Security as an option that won’t be popular with politicians in an election year. The office also warns higher debt can erode confidence in the U.S. dollar.
Dvorkin said before their next bill arrives, families should create a budget and seek a CPA.
“Sit around the kitchen table,” he said. “Maybe it’s not the greatest financial planning tool thing that you’ve done, but it’ll give a good ability for you to chart a path out of debt out of financial stress.”
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