WASHINGTON (The Hill) -
America’s credit card balance has passed $1 trillion, or it’s about to, depending on whom you ask.
The average interest rate on a new card is 24 percent, the highest figure since the Reaganomics era.
A typical American household now carries $10,000 in credit card debt, by one estimate, another record.
If that doesn’t sound like a lot of debt, try paying it off. At $250 per month, with 24 percent interest, you’ll be making payments until 2030, and you’ll spend a total of $20,318, twice what you owed. And that assumes you never use the card again.
“It’s hard to build wealth when you’re paying 20 percent interest every month,” said Ted Rossman, a senior industry analyst at Bankrate.com.
The nation’s credit card debt stands at $986 billion, according to the Federal Reserve. The figure has climbed by $250 billion in two years.
Some other estimates range higher. A WalletHub report put total card debt at $1.2 trillion at the end of 2022.
Just two years ago, the national credit card narrative seemed headed in the opposite direction. Card balances declined from about $850 billion at the start of 2020 to less than $750 billion in the spring of 2021, a time of pandemic penny-pinching and federal stimulus-payment largesse.
“In 2021, we saw people paying off a record amount of debt,” said Jill Gonzalez, a senior analyst at WalletHub. “People had been saving through 2020, without much to do.”
And then, everything changed. Spending picked up. Saving slowed down. The Federal Reserve commenced an unprecedented campaign of interest rate hikes.
Credit card debt rose by $86 billion in the fourth quarter of 2022, the largest increase on record.
The average credit card interest rate stands at 20.92 percent. Just last spring, the average card rate was 16.65 percent.
Older Americans tend to owe more card debt. A New York Life survey found that the average Generation X consumer with a balance owes just over $7,000, compared to an overall average debt of $6,321 per cardholder.
Credit card debt isn’t like a student loan or home equity line. It can sneak up on you. And it carries a stigma of fiscal irresponsibility. A recent NerdWallet survey found that one-third of married Americans with card debt haven’t told their spouses how much they owe.