The national credit card debt reached $1.14 trillion, but cardholders shouldn’t panic – yet.
Transcript:
CONWAY GITTENS: So there’s a new survey out from the Federal Reserve Bank of New York. It says that Americans now owe a record $1.14 trillion on their credit cards. What do you make of that?
TED ROSSMAN: Half of cardholders pay their bills in full every month. So while they’re counted among these balances, they don’t really have debt. Not in the sense of paying interest every month. The average credit card, by the way, charges about 21% So if you’re in the half that is paying interest, that’s a really big deal for you. There’s a take on these credit card balance numbers that showcases an expanding economy, more credit card usage, less cash. It’s not all bad. What is bad is lugging around $6,000 in credit card debt at 21% interest for years and years and years. And I’m giving about the average stats there. Minimum payments in that average scenario keeps you in debt for 18 years and costs you about $9,500 in interest. So if you’re among those with credit card debt, you’ve got to prioritize, pay off, get a 0% balance transfer card, or work with a reputable nonprofit credit counselor. Big picture, though, the credit card market is in good shape. Yeah, delinquencies have gone up and debts gone up. Lenders are feeling pretty good about things and credit is still flowing freely. The trouble is more on the margins. It’s people with lower incomes, lower credit scores. We don’t want to minimize that pain. I mean, that is significant at the individual level. The macro, though, is more positive.
CONWAY GITTENS: So when you hear a number like that, $1.14 trillion worth of credit card debt, is that a reason for you to be concerned. In and of itself?
TED ROSSMAN: It’s not a reason to be concerned. I know it sounds like a big number and it is. Remember, though, it reflects balances. So half of those are paid off every month in full. There is a take on this that is more economic growth, more Card usage, higher population. In many respects, we would actually expect credit card balances to grow over time. It usually takes something pretty exceptional for them to fall like the COVID pandemic or the Great Recession before that. Otherwise, credit card balances pretty much steadily March up and to the right. But what’s important is the individual level. You want to be one of the transactors. You want to be somebody who’s using a card for rewards and convenience, but paying it off at the end of the month.
Subscribe |
Earn. Live. Invest. |
TheStreet Pro |
#creditcard #creditscore #debt
source
