Simple Pleasures Overwhelmed by Credit Card Debt

For Susan Cannon, the little things in life—like enjoying a morning coffee outside or curling up with a book in her garden—are what matter most. However, her tranquility has recently been disturbed by soaring credit card interest rates.

“I have to use my credit card to buy groceries and gas each month,” explained Cannon, a 73-year-old resident of rural Texas living in a mobile home. “I’m keeping up with my bills, but the rising interest rates feel unfair.”

Cannon carries nearly $39,440 in credit card debt across 19 cards, with interest rates ranging from around 12% to a staggering 34.99%. Her financial woes deepened when the pandemic struck, causing her to lose her part-time job as a mystery shopper, something she had taken up after retiring as a medical programmer in 2015.

Since then, she’s managed on a mix of minimal relief funds, Social Security, and pensions. Her credit cards have been essential for everyday costs like gas and groceries. Despite paying more than the minimum required each month, her balance just doesn’t seem to budge.

She feels that the only path to alleviate her debt is to lower her interest rates. Interestingly, both Democratic and Republican lawmakers, alongside former President Trump, support capping these rates. Trump proposed a 10% cap, an idea echoed by figures like Senator Bernie Sanders.

Despite calls for interest rate caps from various sectors, including business leaders, there’s concern that this would limit consumer options, potentially driving them toward riskier credit avenues.

In the United States, credit card debt has reached record-breaking levels, with inflation and rising living costs forcing many to lean on credit cards as a short-term solution. Adam Rust from the Consumer Federation of America noted that stagnant wages relative to living expenses have left people struggling to stay afloat.

Cannon sees the proposed interest rate caps as potentially life-altering. Since her divorce in the 1980s, she has juggled multiple jobs to make ends meet, working during the day and cleaning offices at night. Although she now works as a mystery shopper, earning about $400 to $500 weekly, she’s reduced her hours for health reasons. Finding additional work would be tough too, given the current low hiring rates.

She reflects on her financial strains, expressing uncertainty about her future: “Will I keep working, or will I eventually just get to enjoy a quiet evening outdoors with a book?” Currently, she lives very frugally, foregoing new clothes and other luxuries.

Changing Strategies in a Shifting Economy

About 15 years ago, Cannon thought signing up for multiple credit cards would boost her credit score. Initially, it worked—paying off balances helped her score rise. However, as income dwindled during the pandemic, cards shifted from tools for credit improvement to mere survival resources.

“My electricity bill was $200 last month, and it’ll probably be $300 next month,” she shared, illustrating how financial pressures have led to increased debt just to maintain her home.

While many use credit cards for various reasons, from travel benefits to day-to-day expenses, research indicates that those over 50 are increasingly relying on them for essential living costs.

“I’ve tried to save, but my savings only went toward interest payments,” Cannon remarked. “It feels like I’m stuck.” Attempting to reach out to banks for lower rates, she received a denial letter from Citibank about her 28.49% interest rate, further complicating her situation.

Over the past decade, average credit card interest rates have soared to around 23%, up from about 12%. Rust noted that companies managing store cards are particularly profitable, often attracting consumers in ways that lead to steep interest rates.

Interestingly, an analysis by the New York Fed suggests that interest rates may be set high not just for profit, but potentially to offset losses from defaults.

“People often move toward promotional low APRs without considering their long-term affordability,” said Itamar Drexler, one of the study’s authors.

Navigating Legislative Changes

There seems to be a rare bipartisan interest in addressing credit card interest rates. The 2009 CARD Act improved some transparency rules, but it didn’t cap rates, and there are renewed efforts to change that now. Trump’s recent remarks call for a 10% rate cap, suggesting that consumers shouldn’t be “ripped off” by exorbitant charges.

Many organizations have united to lobby for a bipartisan cap on credit card interest rates, arguing it could save consumers significantly in the long run. However, banking groups warn that such caps could reduce access to credit, pushing many toward more dangerous alternatives like payday loans.

Despite being one of many facing credit card debt, Cannon feels the pinch acutely. Unable to work multiple jobs anymore, she grapples with the reality of her situation daily. “I never thought I’d be in this position,” she confessed. “I’m just surviving.”