Credit card debt skyrockets to a record $1.14 trillion

  • 2 months ago
Americans’ credit card debt levels have surpassed $1 trillion, according to data released by the Federal Reserve Bank of New York.

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Transcript
00:00So there's a new survey out from the Federal Reserve Bank of New York.
00:05It says that Americans now owe a record $1.14 trillion on their credit cards.
00:12What do you make of that?
00:13Half of cardholders pay their bills in full every month.
00:16So while they're counted among these balances, they don't really have debt,
00:20not in the sense of paying interest every month.
00:23The average credit card, by the way, charges about 21%.
00:26So if you're in the half that is paying interest, that's a really big deal for you.
00:31There's a take on these credit card balance numbers that showcases an expanding economy,
00:36more credit card usage, less cash.
00:39It's not all bad.
00:40What is bad is lugging around $6,000 in credit card debt at 21% interest
00:46for years and years and years.
00:48And I'm giving about the average stats there.
00:51Minimum payments in that average scenario keeps you in debt for 18 years
00:55and costs you about $9,500 in interest.
00:58So if you're among those with credit card debt, you've got to prioritize payoff.
01:02Get a 0% balance transfer card or work with a reputable nonprofit credit counselor.
01:08Big picture, though, the credit card market's in good shape.
01:12You know, yeah, delinquencies have gone up and debt's gone up.
01:15Lenders are feeling pretty good about things and credit is still flowing freely.
01:19The trouble is more on the margins.
01:21It's people with lower incomes, lower credit scores.
01:24We don't want to minimize that pain.
01:26I mean, that is significant at the individual level.
01:29The macro, though, is more positive.
01:31So when you hear a number like that, $1.14 trillion worth of credit card debt,
01:36is that a reason for you to be concerned?
01:40In and of itself, it's not a reason to be concerned.
01:43I know it sounds like a big number, and it is.
01:46Remember, though, it reflects balances, so half of those are paid off every month in full.
01:51There is a take on this that is more economic growth, more card usage, higher population.
01:57In many respects, we would actually expect credit card balances to grow over time.
02:02It usually takes something pretty exceptional for them to fall,
02:06like the COVID pandemic or the Great Recession before that.
02:10Otherwise, credit card balances pretty much steadily march up and to the right.
02:14But what's important is the individual level.
02:17You want to be one of the transactors.
02:19You want to be somebody who's using a card for rewards and convenience
02:23but paying it off at the end of the month.

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