A new survey shows that more Americans are piling up credit card debt to help them make ends meet amid record-setting inflation.
Creditcards.com’s report found that 60% credit card holders now have balances of at least one year. This is 10% more than last year.
“It’s even harder to get out of debt when it’s spending on necessities that got you into that position in the first place,”Ted Rossman, Creditcards.com Senior Analyst “These expenses aren’t easily avoided.”
Inflation is rising between 8% to 9% and people are paying more for essential necessities like food and gas. According to the study, plastic usage is increasing for these everyday needs.
“Credit card debt is easy to get into and hard to get out of,”Rossman stated. “High inflation and rising interest rates are making it even harder to break free.”
It is a very expensive way to rob Peter in order to pay Paul.
TransUnion reports that the average credit card holder’s balance is $5270.
If “you only make minimum payments at the average interest rate of 18.17 percent, you’ll be in debt for more than 16 years and will end up paying a grand total of $11,875,” Rossman said. “This helps illustrate why it’s so important to pay way more than the minimum.”
Of those carrying credit card debt, 24% said their purchases were for groceries, childcare and utilities. Clothing and electronics accounted for 11% and another 11 % said the debt came from vacation and entertainment costs.
Many said losing their job would seriously affect their ability to pay off credit card debt. Some 53% of credit card holders with outstanding balances said becoming unemployed would have a “Major impact” on being able to make even the minimum payment on their cards.
Rossman advises those struggling with credit card debt to apply for a card offering the option to transfer an existing balance at 0% interest. “These promotions can last for up to 21 month,” he explained. He suggested that low-rate personal loans and non-profit credit counseling be used as ways to reduce debt and manage your finances.