Credit Card Balances Spike to Record High

During the first year of the pandemic, consumers used stimulus funds and restrained spending as an opportunity to pay off credit card debt.

US credit card balances plunged 17% in less than a year, from $927 billion in the fourth quarter of 2019 to $770 billion in the first quarter of 2021.

Nevertheless, that pattern abruptly changed as consumption fell back to pre-pandemic levels in 2021 and household budgets were severely stretched by inflation in 2022.

Revolving credit card balances have increased 28% over the last two years to a new high of $986 billion, more than undoing the gains People made in paying down their debt during the crisis.

As the Federal Reserve initiated a series of rate hikes in 2022, variable credit card annual percentage rates also increased dramatically at the same time. According to data from the Fed, the typical credit card interest rate rose from 14.6% in 2021 to 19.07% at present.

Consumers might anticipate spending more toward their credit card payments without making as much progress toward paying down their main balance because escalating debt balances are now assessed higher interest rates.

Making more than the minimum payment is crucial if you're having trouble paying off credit card debt in order to avoid incurring interest fees. Another option for paying off debt is to take for a debt consolidation loan or transfer the balance on one of your credit cards.
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