Posted on 01/13/2023 2:30:25 PM PST by george76
A larger number of U.S. consumers are having a tough time paying off credit card dues every month in an environment of elevated inflation, with those making lower income less likely to clear their debts while accruing greater interest payments.
Roughly 46 percent of credit card holders do not pay off their dues in full each month, according to data from Bankrate in December. This is up from 39 percent a year back. Roughly 43 percent of those with credit card debt are not aware of the interest rates charged on their cards.
“People may not be fully aware of how expensive credit card debt—or other alternative loans—are, and that interest on these loans compounds,” Michaela Pagel, a Columbia Business School professor, said to Bloomberg.
“If somebody rolls over $5,000 of credit card debt over five years, it balloons into $12,441 at 20 percent interest.”
Those who make more money are likely to pay their credit card dues in full each month. Pagel pointed out that it is getting more expensive to buy goods and services that households need.
The rising costs of living might be reflected in credit card obligations, and households may have trouble meeting such obligations if their wages have remained constant, he added. Annual inflation has remained above 7 percent for every single month last year until November.
Among those making less than $50,000 annually, only around 45 percent were able to clear off credit card debts each month, while it was 63 percent for people earning more than $100,000, according to Bankrate.
Rising Interest Rates..
Credit card interest rates now average above 19 percent, which is an all-time high. According to Greg McBride, chief financial analyst at Bankrate, rates will only go higher this year.
Interest rates on credit cards closely track the Federal Reserve’s benchmark interest rate changes. With the Fed having indicated that there might be more rate hikes in the future, average credit card annual percentage rate (APR) may hit 20.5 percent by the end of 2023, McBride predicted, according to CNBC.
“The important takeaway for current cardholders is that another one percentage point in rate hikes by the Fed means your rate will move up by one percentage point,” he said.
Overusing credit cards can be financially dangerous. An individual who carries a balance on their credit card is likely to face higher interest charges.
Moreover, credit scores can get affected. The score is calculated using multiple factors, including credit card balances and payment history. If your credit card balance becomes unmanageable and you miss a payment, it can have a negative impact on the score.
Credit Card Market in 2023...
Since second quarter 2021, the credit card industry has seen “strong growth” in originations, according to a TransUnion news release on Dec. 14. Due to tighter lender underwriting standards in anticipation of a potential economic downturn, the company expects card originations to moderate this year.
Credit card originations in 2023 are predicted to be 7.6 percent lower when compared to 2022. TransUnion expects 80.9 million new credit cards this year compared to 87.5 million last year. Credit card balances are estimated to rise to $934.5 billion by the end of 2023, which would be a 1.8 percent year-over-year rise.
“When taking 2022 out of the equation, more consumers will gain access to credit cards in 2023 than in any other year in the last decade. In fact, TransUnion expects 14 million more credit cards to be issued in 2023 than in 2019, a strong year for the consumer credit market,” said Paul Siegfried, senior vice president and credit card business leader at TransUnion.
Credit card delinquency, which has been rising since 2022, is predicted to increase to 2.6 percent through the end of 2023, which would be a 20.3 percent year-over-year increase.
“Amid All-Time-High Interest Rates”
Such nonsense. As investment officer overseeing a cash portfolio, I remember buying one-week Federal Farm Credit Agency paper yielding 15% in 1981.
well duh,,,,same this people been saying for 30 years
Chapter 7’s galore...
Not surprising.
People will hold on to a lifestyle until the “credit levy breaks.”
After the break a new reality sets in, called “paying the piper.”
Or filing for bankruptcy.
They’re talking about credit card interest, which is indeed completely out of control. When 25% is common it’s flat out usury. They’d stone people for that not long ago.
Is there a stock to invest in that re-pos cars?
Sounds like a strong future.
Credit Cards are one of the most evil inventions ever, especially when put in the hands of a college student or a person that’s already broke. :(
Those evil Republicans! (/s)
Ahhh hey Bevis. Hehehe yas tink we’sss might cut back on sum spendin?? Hehehehe
This isn’t the all-time high of interest rates. Course
Biden has two years to go.
Or filing for bankruptcy.
**********
That is also an option, but I wanted to get my ‘paying the piper’ line in.
Is there a stock to invest in that re-pos cars?
Sounds like a strong future.
*******
Off hand, I don’t know. I’ll look into it over the weekend.
You may be on to something.
Credit scores implode!
All the car dealers and collision repair shops have been consolidated into conglomerates. Why not repo guys?
This isn’t the all-time high of interest rates. Course
Biden has two years to go.
*******
Lol
Sorry for laughing.
I had some card adverts in the mail the other week.
42% interest, and I have excellent credit.
I laughed so hard at that.
I was still in High School that year, and I was well aware of the interest rates and Stagflation finally winding down.
I guess that history only started around Clinton’s tenure...
People who don’t fall for the lifestyle of debt don’t need to worry about credit card payments.
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