FOX Business’ Jerry Willis reports on the “uncontrollable” costs of reopening schools and how much families can expect to spend this year.
Americans are increasingly turning to credit cards to cover everyday expenses, with debt hitting an all-time high at the end of June, according to a report released Tuesday by the New York Federal Reserve.
Total credit card debt rose to $1.14 trillion in the three months from April to June, up $27 billion, or about 1%, from the previous quarter, the report said, the highest level in the Fed’s data going back to 2003.
Credit card delinquency rates continued to rise from pre-pandemic levels in the second quarter: As of June, about 9.1% of outstanding credit card debt was in some stage of delinquency, up from 8.5% the previous quarter.
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Credit card usage and rising debt are of particular concern. Interest level They’re now astronomically high: The average annual percentage rate (APR) on credit cards hit a new record of 20.73% last week, according to Bankrate’s database that stretches back to 1985. The previous record was 19% in July 1991.
Credit card delinquency rates continued to rise from pre-pandemic levels in the second quarter. (Photographer: Andrew Haller/Bloomberg via Getty Images/Getty Images)
When people take on debt to cover rising prices, they can end up buying more goods in the long run. For example, if the average American owes $5,000, it would take them about 279 months and $8,124 in interest to pay off the debt while making minimum payments, at current annual interest rates.
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As of June, about 3.2% of total debt was in some stage of delinquency, unchanged from the previous quarter. About 136,000 consumers had bankruptcies added to their credit reports, up from the previous quarter. Despite the increase, researchers said new bankruptcies remain low.
Growth in the credit card sector pushed total household debt to a staggering $17.8 trillion, up $109 billion (0.6%) from the end of March.
The Marriner S. Eccles Federal Reserve Bank Building in Washington, DC, June 25, 2024. (Photographer: Ting Sheng/Bloomberg via Getty Images/Getty Images)
Auto loan balances also contributed to the increase, increasing by $10 billion to $1.62 trillion during the fourth quarter, while mortgage balances increased by $77 billion to $12.51 trillion. Student loan debt decreased by $10 billion, with late payments on federal student loans not being reported to credit bureaus until the end of 2024.
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The increase in the balance is Federal Reserve An aggressive interest rate hike campaign aimed at quelling stubborn inflation and cooling the economy.
nevertheless Inflation has subsided The latest data from the Labor Department shows that it has increased significantly in recent months and remains 3% higher than the same period a year ago.
Soaring inflation has put severe financial pressures on most American households, forcing them to spend more on everyday necessities like food and rent. The burden falls disproportionately on lower-income Americans, whose already-tight paychecks are more vulnerable to price fluctuations.
