NEW HAVEN., Conn. (WTNH) – It can be tempting to rely on plastic, but experts say rely too much on credit cards, and you’ll pay dearly in the end. Soaring inflation is forcing millions of households to stretch their dollars further by putting charges on credit cards.
Americans carry an average of $6,194 in credit card debt, officials said. In May of this year, Americans had a collective balance of $856 billion in debt, which was a stark rise from May 2021.
“We’re starting to see credit card debt moving up. We’re also starting to see that savings that have been accumulated over the past couple of years during the pandemic start to run down,” said Greg McBride, BankRate.com’s chief financial analyst.
According to BankRate.com, more than one in three Americans have less emergency savings now than one year ago. Moody’s Analytics calculated that American households are spending an additional $341 a month to purchase the same goods and services compared to 2021. The rising prices are upending the budgets of millions of Americans.
“It’s really scary because it doesn’t seem like it’s going to get better any time soon,” Lily W. said, a viral TikToker who goes by lilyrnbudgets said.
“Inflation is hitting low and moderate-income households the hardest, and that credit card debt is going up at a time that interest rates are also going up,” McBride said.
Experts are also tracking credit card delinquencies and while they are up, they are still near record lows. But, carrying over that existing balance is getting more expensive.
The average credit card interest rate is currently just shy of 17% and only expected to climb. In this economy, there is little room for error, and for many, getting out of debt can seem overwhelming.
Lily W. says she racked up over $20,000 in credit card debt while attending nursing school but managed to pay it all off by using a technique called cash stuffing.
“Cash stuffing is essentially taking all of the spending that you would do, like on a credit card or debit card, for example, and using strictly cash. And basically, it’s just a way to keep yourself more disciplined and stay within a budget rather than just swiping a card recklessly,” she said.