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Credit Card Debt

The credit card debt we’re facing as a nation clearly shows the significant economic challenges many people are dealing with in today’s high-inflation environment. Even with inflation numbers showing a decrease from the peak levels that exceeded 9% mid-2022, the current rate of 3.4% is still concerning, especially when consumers see prices of essentials such as food, rent, and gas still significantly elevated.

With inflation still chipping away at individual purchasing power, many everyday Americans have no choice but to make up the difference by placing necessary goods and services on their credit cards.

Credit Card Debt Soars Even as CPI Report Shows Inflation Easing

The latest CPI report indicates that inflation eased in April, yet many consumer prices have increased from this same period last year, including food. With prices at local gas stations and grocery stores still unaffordable, credit cards seem to be saving the day. However, this belief is short-lived as credit card balances max out and high monthly payments come due, forcing the reality of the situation to set in.

Related Article: New CPI Data Casting Shadow Over Spring Buying Season

Inflation Weakens Purchasing Power Placing Financial Pressure on Households

Although cooler, inflation has been elevated for quite some time and has placed significant financial strain on households across the country. For instance, the cost of groceries has surged by 21% since early 2021, while the expenses for shelter have increased by 20.4%. Additionally, energy prices have climbed by 32.8%, which has drained bank accounts across America.

According to Moody’s Analytics, U.S. citizens are now spending an additional $784 per month on average compared to this time two years ago, and $1,069 more compared to three years ago. These statistics and others illustrate why many individuals rely on their credit cards just to get by.

Credit Card Delinquency Emerges as a Concern in Q4 Report

Another element of concern is that credit card delinquencies have been increasing steadily since the end of 2021, following a period of historic lows during the COVID-19 pandemic. Delinquencies have currently surpassed pre-pandemic levels. In fact, the Fed’s Center for Microeconomic Data’s last Q4 report indicated that nearly 9% of credit card balances went into delinquency.

Generational Differences in Credit Card Utilization

Breaking things down a bit in the credit card arena, we see data that reveals some generations have been hit harder with credit card debt than others. For instance, a minimal number of Baby Boomers are using their credit cards to their maximum capacity, whereas 15.3% of Gen Z credit card holders use more than 90% of their credit limit.

Despite this high utilization, Gen Z borrowers have relatively low median credit limits of $4,500 compared to older generations whose median limits range from $16,300 for Millennials to $22,000 for Baby Boomers. This difference can largely be attributed to Generation Z’s shorter credit histories, lower credit scores, and generally lower income levels.

Regardless of how you view it, the nation’s credit card debt is out of control. It mirrors the state of our economy and aligns closely with the national debt, which is approaching 35 trillion dollars.

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Leaving Credit Card Debt Behind by Achieving Financial Stability

Individuals currently drowning in credit card debt have two choices: place themselves in the driver’s seat of their financial situation or let the economy determine their fate. The bottom line is that the United States may never get back up on its feet again, especially when the interest on the national debt is over 1.6 trillion dollars. Because of this, it’s up to each individual to make a wise financial choice to protect their wealth and financial well-being. How can this be accomplished? Through assets that are not directly connected to the economy.

To provide you with the full picture, an asset that “is” connected to the economy would be the 401(k). Those who have this type of retirement account know all too well what happens when the economy falters, as it did during the height of the pandemic – 401(k) funds diminish. In contrast, assets that are not affected by the ups and downs of the economy and Wall Street would be gold and other precious metals, along with real estate.

Investing In Rental Real Estate is a Wise Financial Strategy

At Morris Invest, we specialize in empowering individuals to take charge of their financial future through lucrative real estate investments. Rental real estate offers reliable income streams and the potential for significant wealth building. Investing in real estate is wise because this asset type can retain its profitability even during economic downturns.

If you’re thinking about investing in a piece of real estate, feel free to schedule a complimentary 30-minute consultation with Morris Invest to learn about our new construction rental properties. You can also visit our program overview page for more information – we look forward to helping you achieve financial independence.

Before you go, view the following video that goes into detail on how Americans are being crushed by credit card debt:

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