Finance
1 in 3 Americans maxing out credit cards because of inflation: survey
Survey respondents said they maxed out credit cards to cover living expenses. (iStock)
Economic hardship is causing more people to rely on credit to cover living expenses, and some have even maxed out their credit cards to deal with inflation and rising prices, according to a recent survey.
Credit card balances surged past the trillion dollar mark in the fourth quarter of 2023. The increase in credit card debt signals that many Americans are struggling to pay for basic needs. Roughly 45% of Americans said that inflation and rising prices are why they’ve relied so heavily on credit cards, the Debt.com survey said. Nearly 9% of all respondents said they got a credit card to pay for a financial emergency.
Moreover, 35% of Americans said they have maxed out their credit cards in recent years. Of those who had maxed out their credit cards, 85% said they were pushed to use their cards to the limit because of price increases from inflation. Approximately 22% of Americans said they now owe between $10,000 to $20,000 in credit card debt, and 5% have more than $30,000.
“In today’s economic landscape, the surge in credit card debt is a stark indication of the financial strain many Americans face,” Debt.com Chairman Howard Dvorkin said. “With record-high debt levels and a significant portion of individuals maxing out their credit cards, it’s clear that households are grappling with unique challenges.”
Personal loans can offer consumers lower-interest options to refinance high-cost credit card debt. If you’re interested in paying off high-interest debt with a personal loan, you could visit the Credible marketplace to learn more about your options and speak with an expert to get your questions answered.
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Millennials carry the highest credit card debt load
Young Americans’ credit card debt, particularly millennials’, has grown faster than that of other generations. Roughly 31% of this generational segment said they owed at least $10,000 to $20,000 in credit card debt. A higher share of this age group also carries the highest debt load of $20,000 to more than $30,000.
The Federal Reserve has raised interest rates 11 times since 2022 to lower sky-high inflation to a 2% target rate. Now that inflation has moderated somewhat, the Fed has slowed rate hikes, but its restrictive monetary policy has pushed credit card interest rates higher.
“Inflation and escalating living costs are forcing individuals to rely on credit cards as a lifeline,” Debt.com Chairman Howard Dvorkin said. “While credit cards can offer temporary relief, accumulating debt at a rapid pace is unsustainable and can lead to long-term financial repercussions. People need to exercise caution and seek alternate financial strategies to navigate these turbulent times.”
If you’re worried about high-interest debt, you could consider paying it off with a personal loan at a lower rate to reduce your monthly payments. Visit Credible to get your personalized rate in minutes.
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Lower interest rates could open up refinancing opportunity
Some relief could come when the Fed begins to dial back interest rates. Fed Chair Jerome Powell said that the central bank will continue to monitor inflation and other economic indicators to determine when to lower rates. Lowering them too soon would bring the risk of bringing inflation back, while holding back too long poses a risk to economic growth.
“We believe that our policy rate is likely at its peak for this tightening cycle and that, if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year,” Powell said in a statement.
Once interest rates are reduced, consumers can explore refinancing any high-interest debt into lower-interest credit products to lower balances, according to Michele Raneri, TransUnion vice president of U.S. research and consulting.
“If the expected Fed interest rate cuts over the course of 2024 take place, lenders may find opportunity as consumers carrying elevated card balances seek to lower their monthly payments by refinancing high-cost debt into a lower interest product,” Raneri said in a statement. “Consumers should know their credit scores and work to improve them where possible. This will ensure they are as well-positioned as they can be to take advantage of those lower rates if the opportunity arises.”
If you are struggling to pay off debt, you could consider using a personal loan to consolidate your payments at a lower interest rate, saving you money each month. You can visit Credible to find your personalized interest rate without affecting your credit score.
Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.
A television station broadcasts the Federal Reserve’s interest-rate cut on the floor of the New York Stock Exchange (NYSE) in New York, US, on Wednesday, Dec. 18, 2024.
Michael Nagle | Bloomberg | Getty Images
Wall Street’s fear gauge — the VIX — spiked by the second biggest percentage in its history on Wednesday, after the Federal Reserve jolted the stock market by saying it would dial back its rate-cutting campaign.
The CBOE Volatility Index surged 74% to close at 27.62, up from around 15 earlier in the day. That surge is the second-greatest in history, behind a 115% leap to above the 37 handle back in February 2018 when there was a blow-up in funds tracking the volatility index.
Wednesday’s move comes after the central bank said it will likely lower interest rates just twice next year, down from the four cuts it projected back in September, alarming investors who wanted low rates to keep fueling the bull market. The Dow Jones Industrial Average tumbled by 1,100 points to its 10th straight loss.
Typically, a value greater than 20 in the VIX indicates a higher level of fear in the market. However, for most of this year, the VIX had been suppressed below that level, worrying investors who believed the market had gotten overly complacent.
The VIX is calculated based on the prices of put and call options on the S&P 500. A spike could indicate a rush by investors to purchase put options for protection in a decline.
CBOE Volatility Index, 5 days
Still, there have been one other significant surge in the VIX in 2024. The third-biggest surge in the VIX in history occurred in Aug. 5, 2024, when fears of a U.S. recession, and a major unwind in the yen carry trade, spurred a roughly 65% increase in the VIX to close above 38. On an intraday basis, the VIX briefly topped 65 that day.
On Thursday, the VIX was last floating just above the 20 handle, down more than 25% from the prior day.
Workers setting up the TuSimple booth for CES 2022 at the Las Vegas Convention Center on Jan. 3, 2022.
Alex Wong | Getty Images News | Getty Images
Embattled Chinese autonomous trucking company TuSimple has rebranded to CreateAI, focusing on video games and animation, the company announced Thursday.
The news comes as GM folded its Cruise robotaxi business this month, and the once-hot sector of self-driving startups has started to weed out stragglers. TuSimple, which straddled the U.S. and China markets, had its own challenges: concerns over vehicle safety, a $189 million settlement of a securities fraud lawsuit and delisting from the Nasdaq in February.
Now, just over two years after CEO Cheng Lu rejoined the company in the role after being pushed out, he expects the business can break even in 2026.
That’s thanks to a video game based on the hit martial arts novels by Jin Yong that’s slated to release an initial version that year, Cheng said. He anticipates “several hundred million” in revenue in 2027 when the full version is launched.
Before the delisting, TuSimple said it lost $500,000 in the first three quarters of 2023, and spent $164.4 million on research and development during that time.
Company co-founder Mo Chen has a “long history” with the Jin Yong family and started work in 2021 to develop an animated feature based on the stories, Cheng said.
The company claims its artificial intelligence capabilities in developing autonomous driving software give it a base from which to develop generative AI. That’s the next-level tech powering OpenAI’s ChatGPT, which generates human-like responses to user prompts.
Along with the CreateAI rebrand, the company debuted its first major AI model called Ruyi, an open-source model for visual work, available via the Hugging Face platform.
“It’s clear our shareholders see the value in this transformation and want to move forward in this direction,” Cheng said. “Our management team and Board of Directors have received overwhelming support from shareholders at the annual meeting.”
He said the company plans to increase headcount to around 500 next year, up from 300.
Cutting production costs by 70%
While still under the name TuSimple, the company in August announced a partnership with Shanghai Three Body Animation to develop the first animated feature film and video game based on the science fiction novel series “The Three-Body Problem.”
The company said at the time that it was launching a new business segment to develop generative AI applications for video games and animation.
CreateAI expects to lower the cost of top-tier, so-called triple A game production by 70% in the next five to six years, Cheng said. He declined to share whether the company was in talks with gaming giant Tencent.
When asked about the impact of U.S. restrictions, Cheng claimed there were no issues and said the company used a mix of China and non-China cloud computing providers.
The U.S. under the Biden administration has ramped up limits on Chinese businesses’ access to advanced semiconductors used to power generative AI.
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