Reports: As Inflation Rises in 2021, So Has American Credit Card Debt – Lewis-Clark Valley Community

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(The Center Square) – As inflation rose to a 40-year high last year, American credit card debt also skyrocketed, according to analytics published by the personal finance website WalletHub.

Inside Credit card debt A study, Wallethub found that consumers accumulated new debt of $ 87.3 billion in 2021. In the fourth quarter of 2021, debt increased by $ 74.1 billion, the largest increase ever reported, Wallethub notes. It was also 63% higher than the average after the Great Recession for the fourth quarter.

By the end of 2021, the average household credit card balance was $ 8,590. “This is $ 2,642 lower than the expected WalletHub break point,” the report said.

By early 2022, nearly 47% of credit card spending habits had returned to pre-pandemic levels, according to the analysis.

According to the Wallethub quarter credit card research33 million Americans say they will have more credit card debt by the end of 2022. However, 37% say they would be willing to do anything to be debt-free, according to the report.

Inside Rising Fed interest rates In a report, Wallethub found that raising the Federal Reserve’s 0.25% interest rate on March 16 would cost those with credit card debt about $ 1.6 billion in additional financial charges during 2022.

About 88% of respondents said they were concerned about inflation. 55% say raising Fed interest rates is bad for his personal finances, according to another Wallethub overview on interest rates.

“People are struggling to make ends meet and know that raising interest rates will only increase the cost of their debt,” said Jill Gonzalez, a WalletHub analyst, in a statement accompanying the findings. “Every 25 basis points that the Fed raises its target interest rate will cost people with credit card debt about $ 1.6 billion a year.”

A key area where consumers can expect to pay more due to inflation and higher interest rates is the April average for a 48-month new car loan. Wallethub expects this to increase by about 16 basis points in the months following the recent Fed rate hike. By comparison, he notes, mid-April for a 48-month new car loan increased from 4% in November 2015 to 5.5% in February 2019. “This is an increase of 150 basis points over a period of 225 basis points. “At the Fed rate hikes,” he said.

“The average April among credit card bills that accumulate financial charges is already over 16%, which is significantly higher than the interest rates charged on secured debts such as mortgages and car loans,” Gonzalez said. “With credit card interest rates rising after the Federal Reserve takes action, people will see the cost of their credit card debt rise.”

Despite the historically high debt of Americans, about 25% of respondents said it was difficult to get into credit card debt during the COVID-19 lockdown for a variety of reasons. Federal stimulus checks supplemented U.S. bank accounts, restrictions and security concerns led to more stays and less food out, and daily commuting costs to almost zero, according to the survey.

However, this has changed now that aspects of society have reopened. The Americans “are accumulating new debt with increased interest rates lately,” Gonzalez said.

In addition to the $ 87 billion in new debt the Americans added in 2021, WalletHub estimates an increase of more than $ 100 billion in 2022.

To help consumers with credit card debt and manage their finances, Wallethub has published a list of tips In connection. They include setting up and maintaining a budget, setting up an emergency fund that takes steps to improve credit.



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