Finance
Consumers spend more than $1 trillion on interest payments, largely due to increasing credit card debt
Credit card debt makes up half of all interest paid in the last quarter of 2023. (iStock)
Interest payments for U.S. consumers are through the roof. Last quarter, consumers spent a record-high $1.1 trillion on interest payments alone, reported Quartz, using data from the U.S. Bureau of Economic Analysis (BEA).
Over half of those interest payments were not related to mortgage debt. Mortgages often have some of the highest interest over the life of the loans.
The “personal interest payments” line of BEA’s report shows that $563.2 billion of the $1.1 trillion was non-mortgage related interest.
“The dominance of the 15-30-year fixed-rate mortgage has played a significant role in blunting the impact of higher rates on aggregate household debt service,” head of U.S. regional economics at the credit rating agency Fitch, said.
“However, the sharp increase in credit card rates and the resumption of student loan payments will drive non-mortgage household debt service to historic highs in 2024.”
Credit cards have some of the highest interest rates outside of payday loans, with the average interest rate sitting at 22.8% as of 2023.
To get yourself out of your high-interest debt, consider consolidating it into a personal loan with a lower interest rate. You can also plug in some simple information into Credible’s free online tool to determine if a debt consolidation loan is your best option.
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Credit card debts rose more in 2023 than auto loans, student loans
In 2023, credit card debt balances rose more than many other loan types. Credit card balances increased by $50 billion and are now at $1.13 trillion — a 4.6% increase, according to data released by the Federal Reserve Bank of New York.
“We saw a meaningful rise in the amount of consumer borrowing, mostly in the form of unsecured revolving credit, like credit cards.” Rob Haworth, a senior investment strategy director at U.S. Bank Wealth Management, said.
While total auto loan balances are higher than credit card debt, they rose by just $12 billion last year, much lower than credit card debt. Student loans, on the other hand, stayed relatively flat with a $2 billion increase in the last quarter of 2023.
Retail cards and other consumer loans also significantly added to the total debt last year, rising by $25 billion, the Federal Reserve Bank reported.
“As inflation became a burden and government payments ended, consumers were willing to take on more debt,” Matt Schoeppner, a senior economist at U.S. Bank, said.
If your credit card debt is becoming too much of a burden, a personal loan can help make your monthly payment more affordable. If you’re interested in consolidating or refinancing debt, it can help to have experienced loan officers on your side. Visit Credible to get all your loan consolidation and refinancing questions answered.
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Renters deal with higher credit card debt than homeowners
The Americans who deal with the highest amounts of credit card debt are typically renters and lower income borrowers, AP News reported.
Inflation is to blame in many ways. Homeowners and wealthier individuals have the savings cushion to withstand times of high inflation, while renters and low-income earners don’t.
While inflation brought higher housing prices — great for sellers — it also raised the cost of many goods and rental costs, which has caused many renters to put their bills on high-interest credit cards.
The median rent across the country reached $1,712 in January, up by 18.3% from four years ago, according to Realtor.com. Although prices have been dropping slightly since the height of the pandemic, they’re still too high for many.
If you’re struggling to make ends meet and tackle your debt once and for all, a personal loan with a low interest rate can help. If you would like to get a sense of what debt consolidation loan options are available to you, visit Credible to compare rates and lenders.
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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.
Chinese e-commerce company Alibaba has invested heavily in its fast-growing international business as growth slows for its China-focused Taobao and Tmall business.
Nurphoto | Nurphoto | Getty Images
BEIJING — Chinese e-commerce giant Alibaba‘s international arm on Wednesday launched an updated version of its artificial intelligence-powered translation tool that, it says, is better than products offered by Google, DeepL and ChatGPT.
That’s based on an assessment of Alibaba International’s new model, Marco MT, by translation benchmark framework Flores, the Chinese company said.
Alibaba’s fast-growing international unit released the AI translation product as an update to one unveiled about a year ago, which it says already has 500,000 merchant users. Sellers based in one country can use the translation tool to create product pages in the language of the target market.
The new version is based only on large language models, allowing it to draw on contextual clues such as culture or industry-specific terms, Kaifu Zhang, vice president of Alibaba International Digital Commerce Group and head of the business’ artificial intelligence initiative, told CNBC in an interview Tuesday.
“The idea is that we want this AI tool to help the bottom line of the merchants, because if the merchants are doing well, the platform will be doing well,” he said.
Large language models power artificial intelligence applications such as OpenAI’s ChatGPT, which can also translate text. The models, trained on massive amounts of data, can generate humanlike responses to user prompts.
Alibaba’s translation tool is based on its own model called Qwen. The product supports 15 languages: Arabic, Chinese, Dutch, English, French, German, Italian, Japanese, Korean, Polish, Portuguese, Russian, Spanish, Turkish and Ukrainian.
Zhang said he expects “substantial demand” for the tool from Europe and the Americas. He also expects emerging markets to be a significant area of use.
When users of Alibaba.com — a site for suppliers to sell to businesses — are categorized by country, developing countries account for about half of the top 20 active AI tool users, Zhang said.
Chinese companies have increasingly looked abroad for growth opportunities, especially e-commerce merchants. PDD Holdings‘ Temu, fast fashion seller Shein and ByteDance’s TikTok are among the recent global market entrants. Many China-based merchants also sell on Amazon.com.
Contextual clues
Since Alibaba launched the first version of its AI translation tool last fall, the company said merchants have used it for more than 100 million product listings. Similar to other AI-based services, the basic pricing charges merchants by the amount of translated text.
Zhang declined to share how much the updated version would cost. He said it was included in some service bundles for merchants wanting simple exposure to overseas users.
His thinking is that contextual translation makes it much more likely that consumers decide to buy. He shared an example in which a colloquial Chinese description for a slipper would have turned off English-speaking consumers if it was only translated literally, without getting at the implied meaning.
“The updated translation engine is going to make Double 11 a better experience for consumers because of more authentic expression,” Zhang said, in reference to the Alibaba-led shopping festival that centers on Nov. 11 each year.
Alibaba’s international business includes platforms such as AliExpress and Lazada, which primarily targets Southeast Asia. The international unit reported sales growth of 32% to $4.03 billion in the quarter ended June from a year ago.
That’s in contrast to a 1% year-on-year drop in sales to $15.6 billion for Alibaba’s main Taobao and Tmall e-commerce business, which has focused on China.
The Taobao app is also popular with consumers in Singapore. In September, the app launched an AI-powered English version for users in the country.
Nomura analysts expect that Alibaba’s international revenue slowed slightly to 29% year-on-year growth in the quarter ended September, while operating losses narrowed, according to an Oct. 10 report. Alibaba has yet to announce when it will release quarterly earnings.
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