Knoxville, Tenn. (WATE) — If you’ve been using your credit card a lot lately, you’re one of the millions who have racked up debt at record rates. In a few months, there is a good chance that the total credit card balance of people in the United States will soon reach a new record high. This record high debt would be a big reversal from the sharp decline seen in 2020 and early 2021.
At the height of the pandemic, spending and credit debt slowed, but things have apparently changed. While most working Americans are making more money and average hourly wages have fallen over the past year, many paychecks are still pinched with the highest rate of inflation in 40 years.
Across America, we’re spending big using our credit cards at an all-time high. The most recent release of the Federal Reserve’s monthly consumer credit report shows that there is a 35.3% increase, in March 2022, in revolving credit debt. American Express said customer spending increased 35% in the first quarter of 2022 compared to the same period in 2021. Capital One reported a 26% year-over-year increase in purchase volume and Chase noted a 21% year-over-year increase. during his first trimester.
“One of the things is that with COVID there has been so much influx of money. A lot of small businesses got loans, free money. Many people got free money. One of the things about finance is that your expenses are always increasing to meet your income. Expenses always increase to meet your income. So now what happens with people who have this extra money, people are used to these extra expenses,” said John Fawaz, TN financial planners.
The youngest Americans, ages 18 to 29, have the hardest time repaying their debts with the highest delinquency rates of 9.3%. The rate drops to 6% for those aged 30 to 39. Another drop to 5.6% for 40 to 49 year olds. Then 4.8% for those between 50 and 59 years old. Fawaz suggests a way to start reducing credit card debt.
“One of the easiest things you can do, but you have to be careful, if you have some equity in your home is to take out a home equity loan and pay off the credit cards. problem is you have to be careful because if you are not disciplined a year later you will have a home equity loan and you will have a new credit card. that you don’t have new credit cards,” Fawaz said.
If you’re looking to get rid of your credit card debt, opening a new credit card might not be your first thought, but a balance transfer credit card can help.
“So a lot of credit card companies offer that. Let’s say you have a credit card with Chase. What Chase will allow you to do, if you have money with another credit card company, is transfer your balances from the other credit card companies and what they will do is sweeten the pot for a year or two. If you transfer it here, we will only charge you 6%,” Fawaz said.
Although balance transfer cards sound like a good thing, they often set maximum limits on the amount of debt you can transfer, either a percentage of your total credit limit or a fixed dollar amount. In addition, you cannot make transfers between cards issued by the same bank. Before requesting a transfer, be sure to read the fine print. Also, good or excellent credit is often required to qualify for a balance transfer credit card.