There’s a huge problem impacting our economy and we need to talk about it – Americans are absolutely drowning in credit card debt. In the fourth quarter of 2023, Americans’ total credit card balances increased by $50 billion, reaching a total of $1.129 trillion, according to data from the Federal Reserve Bank of New York. In fact, consumer debt is at its highest balance since the New York Fed began tracking data in the 1990s.
On today’s show, we’re going to dive in what’s going on with the state of credit card debt in the US. We’re going to talk about delinquencies, interest rates, and much more. If you want to know more about consumer debt and how it’s impacting the daily lives of Americans, tune in to this episode!
More About This Show
An increasing number of credit card holders are falling behind on their payments, accruing astronomical late fees, and being slammed by skyrocketing interest rates as a penalty.
This is a sad situation because inflation is hurting individuals and families, and many people are having to turn to credit cards for basic necessities. They’re paying sky high interest rates just to feed their families and put gas in their tanks.
And to make matters worse, credit card APRs are increasing. Just a few years ago in 2021, interest rates on credit cards averaged 16.45%. By the end of 2023, they had risen to over 22%. That is significant when we’re talking about TRILLIONS of dollars in credit card debt.
And of course, due in part to these interest rates, people are struggling to stay afloat, resulting in rising rates of delinquencies as well. Data from the Federal Reserve showed that credit card delinquencies reached 8.5% in the fourth quarter of 2023 – that’s up from 5.87% in 2022, and 4.1% in 2021. That means in a span of two years, credit card delinquencies have more than doubled.
According to a 2022 LendingTree survey, only 35% of cardholders are able to pay off their balance in full every month. When you’re regularly spending on your credit card and not paying it off, those interest rates really start to add up. It becomes increasingly difficult to pay off your debt because the interest charges become unbearable.
Let’s talk about some of the few key factors that are contributing to the issue at hand: one major contributing factor in the credit card industry is predatory rates. So not only are credit card interest rates rising in accordance with the Fed’s rate hikes the past year, but they’re also exorbitantly high, for no good reason. USA Today recently reported that certain store credit cards have climbed to record high interest rates of 33%.
The sad truth is these companies can charge whatever they want. Store cards, of course, are the worst offenders, but most, if not all, credit card interest rates are extremely predatory. There’s no protection for you as a consumer, these banks and lenders will do whatever they can to get their hooks into people, and they prey on a lack of financial education.
Another problem, of course, is inflation. The cost of everything has risen, and sadly many consumers are in such a dire financial situation that they cannot afford these price increases – so they rely on credit cards to fund their lifestyle, and then get stuck in a vicious cycle.
It’s more important than ever to understand the consequences of taking on consumer debt and to know when and how to use credit cards. Credit is a resource and a tool. But it can also cause financial ruin, anxiety, and devastation.
Episode Resources
Book a Call with Our Team
morrisinvest.com/bootcamp ← Download your FREE 90-Day Bootcamp!
Subscribe to Investing in Real Estate on Apple Podcasts
Find Your Financial Freedom Number
Subscribe to the Morris Invest YouTube channel
Like Morris Invest on Facebook
DISCLAIMER: I am not a financial adviser. I only express my opinion based on my experience. Your experience may be different. These videos are for educational and inspirational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. There is no guarantee of gains or losses on investments.
AFFILIATE DISCLOSURE: Some of the links on this channel are affiliate links, meaning, at NO additional cost to you, I may earn a commission if you click through and make a purchase and/or subscribe. However, this does not impact my opinion. We recommend them because they are helpful and useful, not because of the small commissions we make if you decide to use their services. Please do not spend any money on these products unless you feel you need them or that they will help you achieve your goals.