
If you’ve been following the mainstream media recently, you’re aware of the narrative they’re pushing that claims the U.S. economy is strong and things are looking up. Meanwhile, the Federal Reserve Bank of New York reports that U.S. citizens’ total credit card balance came in at an alarming $1.142 trillion in the second quarter of 2024 – this reflects a different economic reality than what’s being reported. The truth is that the people of this country are struggling financially and forced to use credit cards to pay for basic necessities.
To narrow this down a bit, Bankrate’s most recent Credit Card Utilization Survey states that 2 in 5 credit card holders are recorded as being maxed out, or on the verge of hitting their credit card ceiling, beginning as far back as when the Feds started increasing interest rates in the Spring of 2022.
Credit card balances are growing and inflation at the grocery store is hitting the American people hard, but the economy is doing well, right? Well, if you sit down and talk with individuals who are in debt, you get a sense of how the economy is really doing and how it’s impacting everyday citizens. Ted Rossman, Bankrate Senior Credit Card Analyst, touches on this: “A few years of high inflation and high interest rates, and many households are struggling. Those who are most equipped to get through it are having an easier time getting credit, but it’s a different story for those with lower incomes and lower credit scores.”
Rate Hikes Drive Almost 40% of U.S. Citizens to Max Out Their Credit Cards
Numerous rate hikes that were put into effect over the past few years, coupled with inflation, have scores of people depending on their credit cards to get by. It’s true that rising interest rates and high inflation markers are common economic issues. However, if you dig a little deeper, you see there’s a larger issue at play that’s responsible for America’s financial turmoil that’s pushing credit card debt through the roof.
The fact that Americans are drowning in debt can be traced back to excessive and irresponsible government spending and money printing that has devalued the U.S. dollar. As of today, the national debt is almost 36 trillion dollars. This all set the stage for interest rate increases and massive inflation, which has made everyday living unaffordable, especially for those who live paycheck to paycheck.
Related Articles:
- The Toll of Government Spending on American Credit Card Debt
- A Ticking Time Bomb – National Debt Growing by $1 Trillion Every 100 Days
Americans are Using Credit Cards to Put Food on the Table
To put it bluntly, these people are not using their cards for a day of family fun, vacations, or shopping sprees. No, they’re using available credit to put food on the table, pay the electric bill, put gas in the car, and so on, effectively pushing their card limits to the max.
Michael Hershfield, CEO and Founder of Accrue Savings, a fintech platform, comments on this scenario: “The Fed’s rate hikes have made it more expensive to carry credit card debt, especially for those with lower credit scores. This creates a cycle where growing balances and rising interest payments lead to faster max-outs, leaving consumers struggling to pay down debt.”
Yes, there was a recent large rate cut, but Americans are currently in the hole so far that it’s going to take a lot more than a few rate drops to dig them out. This is especially true when we just saw an increase of $1.115 trillion in credit card debt from the previous quarter, marking the largest balance since the New York Fed started recording data in 1999.
Total Outstanding Credit Card Balances – 1999 to Present
Survey Shows Those Most Likely to Max Out Their Credit Cards
Bankrate’s Credit Card Utilization Survey found that those who were most likely to reach their credit card limit, or come close to it, were parents with children who are younger than 18, Generation X, as well as U.S. citizens with an income of under $50,000 per year. Here are a few facts from the survey:
Credit Card Holder Debt by Generation:
- Gen X (44-59 years of age): 27% maxed out their credit/17% are close to the limit.
- Millennials (28-43 years of age): 23% maxed out their credit/18% are close to the limit.
- Baby Boomers (60-78 years of age): 17% maxed out their credit/15% are close to the limit.
Credit Card Holder Debt by Income Class:
- 41% of income earners between $50,000-$79,999, as well as $80,000-$99,999, have maxed out their credit cards or are close to the limit since interest rates began skyrocketing.
- 29% of those earning $100,000 have maxed out their credit cards or are close to the limit.
Skyrocketing interest rates, student loan payments starting back up, inflation, and other elements have driven credit card debt to unmanageable levels. This situation has had an impact on the general public, financial institutions, as well as small and large businesses.
Related Article: The Shockwave of Inflation: Credit Card Debt Out of Control Amid Surging Prices
Banks are Taking a Hit with Massive Charge-Offs Due to Uncollectible Debts
It’s not just everyday people feeling the strain from debt; banks are also taking a hit, and JPMorgan Chase, Wells Fargo, and Bank of America are on the list. According to recent data released by the Federal Deposit Insurance Corporation, U.S. banks are disposing of billions in uncollectible debts, with $21.3 billion in net charge-offs during the year’s second quarter, mostly caused by defaults on credit cards and troubled commercial real estate loans. This represents the highest quarterly net charge-off rate since the second quarter of 2013, and marks a 20 basis point increase compared to the same time last year, revealing that customers are still struggling with high interest rates and inflation.
Don’t Let the U.S. Economy Dictate Your Financial Situation
Can the U.S. government turn the situation around and help Americans get out of debt? Well, if you’ve been paying close attention to what the administration’s priorities have been and where they’ve been directing funds, then you know the clear answer is no. The past few years have been a testament to the fact that the government won’t be capable of fixing America’s debt crises. In fact, there’s a good chance they’ll only make matters worse as they pass out millions of dollars to support non-citizens who stroll through the U.S. border, as well as shell out billions of dollars to fund wars in other nations.
The only reliable path to financial security is to rely on yourself and not the White House administration, the government, or any other third party, even your place of employment. I know from personal experience that when you allow someone else to determine the fate of your financial situation, the rug can be pulled out from under you at any moment. You can read my personal story on how I left my job in the media industry to invest in rental real estate, which put me in the driver’s seat of my wealth and financial stability.
Become Financially Stable by Investing in Real Estate
If you’re in debt and your financial situation is shaky, it may be time to change the path you’re on and start exploring other options. You can begin by heading over to my article for some insight – Reasons Why Investing in Real Estate is a Smart Strategy for Building Wealth. I also suggest researching ways to fund a rental property purchase. For this, you may want to consider Fund & Grow, a company that helps investors find the funds for a downpayment, typically through introductory offers that include zero-interest business credit cards. Another funding option is to utilize a HELOC if you own a home. You can get more details on this from my article, Exploring a HELOC for Purchasing Investment Properties.
If you think you may be interested in rental real estate, feel free to contact Morris Invest, a full-service real estate investment company. We offer new construction rental properties in lucrative housing markets, place a property manager and tenant for you, as well as help you obtain lower than industry standard mortgage rates. We make it super simple for you to own a cash flowing rental property that will place you on the path to financial independence so you won’t have to rely on your credit cards and go into debt.
Dive into the following video on how consumer debt is out of control: