Americans are increasingly turning to their credit cards to cover everyday expenses, with debt surpassing $1 trillion for the first time at the end of June, according to a New York Federal Reserve report published Tuesday.
In the three-month period from April to June, total credit card debt surged to $1.03 trillion, an increase of $45 billion, or 4.6% from the previous quarter. It marks the highest level on record in Fed data dating back to 2003.
The rise in credit card usage and debt is particularly concerning because interest rates are astronomically high right now. The average credit card annual percentage rate, or APR, hit a new record of 20.33% last week, according to a Bankrate database that goes back to 1985. The previous record was 19% in July 1991.
If people are carrying debt to compensate for steeper prices, they could end up paying more for items in the long run. For instance, if you owe $5,000 in debt – which the average American does – current APR levels would mean it would take about 277 months and $7,723 in interest to pay off the debt making the minimum payments.
“One trillion dollars in credit card debt is staggering,” said Matt Schulz, chief credit analyst at LendingTree. “Unfortunately, it is likely only going to keep growing from here.”
Via: www.foxbusiness.com/economy/credit-card-debt-hits-1-trillion-first-time-ever