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.
AMERICANS LIVING PAYCHECK TO PAYCHECK OWN 60% OF CREDIT CARD DEBT: SURVEY
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.
Rates were cut by a quarter of a percentage point. (iStock )
The Federal Reserve just cut interest rates one more time this year. In their recent meeting, the Fed decided to cut rates by a quarter of a percentage point, dropping rates to 4.25% to 4.5%. This move was largely expected by economists.
The Fed cited indicators of an expanding economy and an easing labor market after its other rate cuts. This is the third time rates have been cut this year, but economists don’t expect as many cuts in 2025.
“The median member now expects that there will only be two cuts in 2025 and that the federal funds target will be 3% in the long run,” MBA Senior Vice President and Chief Economist Mike Fratantoni said in a statement. “MBA forecasts that the federal funds rate will only drop to 3.75% this cycle.”
The unemployment rate also remains low, and inflation is making slow but steady progress towards the committee’s 2% goal, both factors that created a bottleneck in the final decision to cut rates.
“While the unemployment rate has increased over the past year, and inflation has trended down, in recent months, inflation has plateaued,” Fratantoni said. “It was not surprising to see a dissent at this meeting, with one member voting to keep rates steady.”
With the latest rate cut, The Federal Reserve hopes to inch closer to their inflation growth and ease the unemployment rate.
Worried about the state of the economy? You could consider paying down high-interest debt with a personal loan at a lower interest rate. Visit Credible to speak with a personal loan expert and get your questions answered.
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Home sales likely to increase in 2025
The housing market has faced a roller coaster of a year, but certain aspects are expected to raise home sales in 2025. Real estate experts predict a slow thaw for mortgage rates, giving prospective buyers who have been priced out of the market in recent years more wiggle room.
Many housing market measures are trending closer to historical norms, showing signs of an improved market in the new year. Listings are still lower than before the pandemic, but there are significantly more than in March, when there was a 25% deficit, according to Zillow.
Buyers shouldn’t expect an entirely smooth path when buying in 2025, however. For many, 2025 looks eerily similar to the volatile market of 2024.
“There’s a strong sense of déjà vu on tap for 2025. We are once again expecting mortgage rates to get better gradually, and opportunities for buyers should follow, but be prepared for plenty of bumps on that path,” Zillow Chief Economist Skylar Olsen said.
Shoppers looking to move in the slower winter months have an advantage. Sellers who have been waiting for rates to drop may be looking to unload their homes while interest rates are on the decline.
“Those shopping this winter have plenty of time to choose and a relatively strong position in negotiations,” Olsen said.
If you’re looking to purchase a home, consider visiting Credible to find the best mortgage rate for your financial situation.
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Mortgage rates and home prices expected to fluctuate over the next year
More listings may be on the horizon, but buyers shouldn’t expect rock bottom mortgage rates any time soon. Prices also aren’t set to drop just yet. Prices are expected to grow by 3.7%, Realtor.com recently reported.
Mortgage rates are also expected to remain in the 6% range, with fluctuations over the year, much like 2024. Due to these small improvements, single family home listings are expected to grow by nearly 14%, according to Realtor.com.
Sellers in certain highly desirable areas will still hold the power in 2025. Inventory is improving, but it’s still limited compared to years past. This gives sellers the upper hand when negotiating prices.
How the newest presidential administration will factor in the housing market recovery process is difficult to predict, but there’s a potential for a “Trump Bump”, as Realtor.com calls it.
“While President-elect Trump can work quickly with his administration to implement some regulatory changes, other policies that will affect housing, such as tax changes and broad deregulation, require the cooperation of other branches and levels of government,” Realtor.com Chief Economist Danielle Hale said.
“The size and direction of a Trump bump will depend on what campaign proposals ultimately become policy and when,” Hale said. “For now, we expect a gradual improvement in housing market dynamics powered by broader economic factors. The new administration’s policies have the potential to enhance or hamper the housing recovery, and the details will matter.”
If you think you’re ready to shop around for a home loan, use Credible to help you easily compare interest rates from multiple lenders in minutes.
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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.
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