Nomi Prince, author of “Perpetual Distortion,” argues that the Fed’s policies are having a negative impact on everyone involved in “making money.”
Americans are hoarding more money credit card debt This is because the prices of daily necessities continue to rise due to still high inflation and soaring interest rates.
Federal Reserve Bank of New York Quarterly report on household debt and creditThe report, scheduled to be released Tuesday morning, shows that credit card debt hit an all-time high of 1.13 trillion in the three-month period from January to March, said Matt Schultz, LendingTree’s chief credit analyst. It is expected that this will mark a new record, breaking the billion dollar mark.
“Credit card balances have never increased from the fourth quarter of that year to the first quarter of the following year. I think tomorrow’s report will likely show an increase for the first time. “It’s a new record for credit card balances,” Schultz said.
The expected surge would mark a sharp reversal from 2020, when consumers were rapidly paying down their credit card bills as a result of stay-at-home orders and an influx of stimulus money.
Latest New York Fed survey shows Americans expect high inflation to continue
Mastercard, Visa and Discover credit card stickers on a door in New York, October 17, 2023. (Angus Mordaunt/Bloomberg via Getty Images/Getty Images)
Since then, my credit card debt has exploded. From 2021 to the end of 2023, credit balances increased by 47%, the highest three-year growth rate ever.
The ongoing inflation crisis is one reason why consumers are increasingly relying on credit cards to pay their bills.
“High inflation and high interest rates are contributing significantly to Americans’ debt burden, making it difficult to service this debt,” Schultz said.
Inflation has fallen significantly from its peak of 9.1% in June 2022, but remains well above the Federal Reserve’s 2% target. Moreover, prices are up 18.9% compared to January 2021, just before inflation began to spike.
Small businesses are piling up credit card debt, raising some concerns
caused by high inflation severe financial pressure Most American households are being forced to pay more for everyday necessities like food and rent. Grocery prices have increased 21% since the beginning of 2021, and shelter costs have increased 20.4%, according to FOX Business calculations. Meanwhile, energy prices have increased by 32.8%.
Americans are paying Average over $784 That’s an increase of $1,069 each month compared to the same period two years ago and three years ago, according to Moody’s Analytics.
| ticker | safety | last | change | change % |
|---|---|---|---|---|
| V | Visa Co., Ltd. | 279.39 | -1.35 | -0.48% |
| Ma | Mastercard Co., Ltd. | 457.76 | +0.78 | +0.17% |
| JPM | JPMorgan Chase & Co. | 198.73 | -0.04 | -0.02% |
| BAC | bank of america corporation | 38.21 | -0.24 | -0.62% |
| DFS | discover financial services | 124.17 | +0.77 | +0.62% |
Increased credit card usage and debt are especially concerning because interest rates are astronomically high right now. According to the Bankrate database dating back to 1985, the average annual percentage rate (APR) for credit cards has hovered around 20.66%, near all-time highs.
If people take on debt to cover higher prices, goods can become more expensive to buy in the long run. For example, if the average American owed $5,000, at current annual interest rates, it would take approximately 279 months and $8,124 in interest to pay off the debt with minimum payments. become.
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Schultz advises debt-ridden credit card holders to get their credit card APR reduced over the phone, get a 0% balance transfer credit card, and re-budget to better resolve their debt. to evaluate, and high yield savings account Take advantage of high interest rates and focus on improving your credit score.
