Credit Card Debt Is Getting Out of Control

Credit card debt is climbing in the United States, with the average person carrying a balance upwards of $5,000, which is 13% higher than in 2021.

By Jennifer Hollohan | Published

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Everyone is feeling the pain of inflation, especially since wages are significantly lagging behind. So, more and more people have started turning toward their cards to help. And the bad news is that this shift has led to shockingly high credit card debt. 

Before the pandemic, credit cards were handy for emergencies, trips, or a fun night out on the town. Over 60% of users paid off their balance from month to month. Not only did it help build their credit, but it also ensured those coveted points or cash back piled up. 

And during the early years of the pandemic, many Americans used federal relief payments to start paying down their remaining debt. Of course, it didn’t hurt that dining out and travel were heavily restricted, thus curtailing spending. Unfortunately, once the economy started reopening, those good habits often disappeared.

That would not have been the end of the world in typical economic times. But our economy is far from normal right now. Rampant inflation, soaring interest rates, and threats of a recession impact every American.

As costs of goods rose, far beyond standard wage increases, Americans started turning to credit cards to help. But, unlike in previous years, many people now struggle to pay off outstanding balances. That has resulted in exceedingly high levels of credit card debt, which is bad news for consumers. 

According to NPR, “The average credit card user was carrying a balance of $5,474 last fall, according to TransUnion, up 13% from 2021.” Making matters worse is the fact that an increasing number of balances are rolling over from month to month. In fact, 46% of credit card users now have a balance, up 7% from the prior year.

However, most current credit card debt doesn’t exist because of fun or travel. Ted Rossman, an analyst at Bankrate, says, “Contrary to popular opinion, it’s not usually a vacation or shopping spree. It’s usually something pretty practical that gets you into credit card debt.”

And these days, “something practical” is often a necessity, like groceries. One look at the price tag on eggs these days is all it takes to understand why people have piled up credit card debt. Unfortunately, it isn’t necessarily the debt itself that is crippling America.

Credit card interest rates are skyrocketing, just like everything else in our world. “The average interest rate on credit card debt has soared to nearly 20%, from just over 16% at the beginning of last year. That’s the largest one-year increase in the four decades Bankrate has been tracking rates.”

Part of that enormous jump is because the Federal Reserve keeps raising interest rates. And every time the Fed does that, your credit card debt becomes heavier. However, there are ways to escape this vicious cycle.

Experts recommend getting out from under your credit card debt as soon as possible. The good news is that you do not have to face that battle alone. There are wonderful non-profit credit counselors who can assess your situation and provide customized recommendations.