The Federal Reserve’s strategy to lower inflation involved raising interest rates. However, after 11 rate hikes, credit card debt has become unmanageable for many Americans.
According to a report from the New York Federal Reserve, credit card debt continues to reach record highs. The latest data revealed that Americans collectively owe more than $1.14 trillion on their credit cards. Balances rose by $27 billion in the second quarter of 2024 alone, marking a nearly 6% increase from 2023.
Credit cards have become one of the most expensive ways to borrow money. With their variable rates directly tied to the Federal Reserve’s interest rate hikes, people are now paying more than 20% interest on top of their payments.
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So what this means for the average American? With an annual percentage rate of 20%, if a person made minimum monthly payments on an average credit card balance of $6,218, it would take 18 years to pay off that debt. The total amount paid in interest in that time, not including payments toward the principle, would exceed $9,300.
These historically high levels of credit card debt make it difficult to manage. When considering other forms of debt, total household debt has surged to over $17.8 trillion.
