(The National Desk) Many consumers are leaning on their credit cards more and more as the price of everyday goods continues to climb.
Debt is up across the board as record-high inflation takes its toll and people are relying on their lines of credit more and more just to make ends meet. But some experts say it’s not all bad debt people are taking on.
Consumer debt has topped $16 trillion for the first time ever.
“That could be actually a pretty bad signal because it could be signaling that people are really struggling to keep up with inflation,” said Connel Fullenkamp, an economist with Duke University.
According to the Federal Reserve Bank of New York, most of the increase was driven by a jump in mortgage borrowing.
The Fed also said credit card balances increased by $46 billion last quarter, and that debt jumped 13% over the past year — the biggest increase in two decades.
“Credit card rates are very high. The average is about 16.4% and they’re going higher. They could well be close to 19% by the end of the year,” said Ted Rossman, an analyst with Bankrate.com.
Some experts believe the current surge in credit card spending is due to people buying things now, to save money, later. This comes shortly after the Fed’s second 0.75% interest rate hike, intended to cool the economy and tame inflation.
“The effect of inflation itself could be driving people to spend because if I know the prices are going up at a high rate, they’re going to be higher next week or next month, I’m going to spend the money now and get things while they’re still relatively cheap,” Fullenkamp said.
Another factor is the summer of revenge travel as Americans are eager to spend in response to the pandemic.
“Getting back in the swing of having vacations and things like that and that could all be very innocuous and people just finally going back to using their credit card and they hadn’t been doing things like buying plane tickets and going to hotels,” said Fullenkamp.
Not only are credit card balances rising but Americans opened 233 million new credit card accounts during the second quarter — the most since 2008.
Reporting from The National Desk.
