Households have turned to credit cards to maintain their living standards as the cost of living went up, experts said—a move that can have harmful consequences.
Americans have accumulated a staggering $1.03 trillion in credit card debt, according to the latest data reported from the Federal Reserve Bank of New York. The figure surged by $45 billion, or 4.6 percent, between April and June alone.
As of June 2023, inflation had slowed down to 3 percent, the lowest it has been since March 2021, but still higher than the Federal Reserve's target of 2 percent. "High credit card usage is a symptom of rising costs, layoffs, and stagnant wages," said Deborah Owens, the founder of WealthyU, a platform helping women to invest.
"Since the last financial crisis household income has not risen in line with expenses, and most households have filled the gap with debt," he told"Credit cards in America are the most commonly available type of credit—from store cards to promotional cards from banks and other card providers with aggressive marketing and easy-to-sign-up services," he added.
"It's likely that consumers will continue to turn to credit cards to pay for essentials like gas or food as prices remain high," Lambarena said."For those carrying a balance with today's sky-high interest rates, their debt may also continue to dramatically increase if they aren't paying more than the minimum payment at every due date."
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