Inflation causing Americans to rely more on credit cards
HUNTSVILLE, Ala. (WAFF) - Inflation has more Americans relying on credit cards, and higher interest rates may be causing Americans to rack up more debt, according to the Consumer Financial Protection Bureau (CFPB).
According to John McNamara, a representative of CFPB, renters owed an average of about 20% more on their credit cards in June 2022 than they did just three years ago.
He says more than 175 million Americans have at least one credit card, and many don’t pay their balance in full every month. That’s when interest rates start to make the problem worse.
In contrast to mortgages and car loans, credit cards have an adjustable interest rate. When the Federal Reserve Board raises loan interest rates, the credit card interest rate goes up, as well, according to McNamara. This allows debt to accumulate.
McNamara says there are some things you can do to reduce your credit card usage.
“The first thing is to think about how much they pay, and again, a considerable number of consumers pay the just the minimum balance, which again, allows that interest to accrue. When you’re paying that minimum balance [and] when you’re carrying those balances, interest begins accruing the minute you buy something else. So, think about paying it down more if they can,” he said.
“Other things to consider might be transferring the credit card debt to a new card that offers a zero or a low interest rate,” he added.
According to McNamara, you can also strategically align the credit cards with what you need and look into the personal loans. Interest rates for personal loans tend to be lower.
For more information on credit cards and debt collection, visit CFPB’s website.
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