With consumers’ finances under pressure due to inflation, a new report and Credit Card Debt Study found that consumers paid down $13.2 billion in credit card debt during Q1 2022 (76% less than last year). In addition, WalletHub’s Fed Rate Hike Report revealed that a Federal Reserve interest rate increase on June 15 would cost people with credit card debt an extra $3.2 billion in the next year.
Below are the key takeaways from the studies:
|Cities with the Biggest Debt Paydown||Cities with the Smallest Debt Paydown|
|Pearl City, HI||Detroit, MI|
|New York, NY||Toledo, OH|
|Santa Clarita, CA||Cleveland, OH|
|Chula Vista, CA||Madison, WI|
|Chesapeake, VA||Newark, NJ|
|Oxnard, CA||Lewiston, ME|
|Anchorage, AK||Milwaukee, WI|
|Santa Ana, CA||Cedar Rapids, IA|
|Virginia Beach, VA||Buffalo, NY|
|Scottsdale, AZ||Fort Wayne, IN|
Credit Card Debt Study Key Stats
- Debt Reduction. Consumers paid off $13.2 billion in credit card debt during Q1 2022, which is 76% less than the same period last year.
- Higher Average Household. The average household credit card balance was $8,425 in Q1 2022, 11.9% higher than in Q1 2021.
- Average Annual Increase. The average annual increase in credit card debt over the past 10 years is just $49.7 billion.
- Best Balance Transfer Credit Cards. The best balance transfer credit cards currently offer 0% APRs for the first 15-21 months with no annual fee and low balance transfer fees.
Fed Rate Hike Survey Key Findings
- More Costly Debt. A Federal Reserve interest rate increase on June 15 would cost people with credit card debt an extra $3.2 billion in the next year. That’s on top of the $4.9 billion increase already caused by the Fed’s previous rate hikes this year.
- Consumers Not Happy About Rate Hikes. 72 million Americans are upset about the Fed raising interest rates.
- Inflation Concerns. 89% of Americans are concerned about inflation right now.
- Heading for a Recession. 8 in 10 Americans think we are heading into a recession.
- More Worry Over Inflation Than High Rates. 76% of Americans are more worried about high inflation than high-interest rates.
- People Spending Less Due to Rate Increases. About 1 in 2 people (49%) want to spend less money due to this year’s Fed rate increases.
What do the latest credit card debt statistics tell us about the health of U.S. consumers?
“The latest credit card debt statistics tell us that consumers have not only returned to pre-pandemic spending habits but are also making up for reduced spending during Covid. After cutting back during the height of the pandemic, U.S. consumers added $86 billion in new credit card debt during 2021, resuming a pattern of unsustainable spending that had become the norm before the pandemic,” said Jill Gonzalez, WalletHub analyst. “In 2022, consumers started the year with the smallest first-quarter pay down since 2006, and WalletHub projects an increase of more than $100 billion for the year overall.”
What is the average household’s credit card balance?
“The average household credit card balance in the first quarter of 2022 was $8,425, according to a new WalletHub study, or about 12% higher than it was in the first quarter of 2021,” Gonzalez added. “It still could have been worse. Consumers paid down some of their credit card balances during the first quarter of 2022, as is customary for the beginning of the year, but we can expect the next few quarters to reflect nothing but new debt being added to the books.”
How will credit card debt levels look by the end of 2022?
“Around 33 million Americans say they will have more credit card debt by the end of 2022, according to a WalletHub survey, and we project an increase of at least $100 billion in credit card debt during the year,” she said. “This shouldn’t be much of a surprise, considering the increased prices consumers are being confronted with and their increased appetite to spend.”
How do people feel about Fed rate hikes?
“A new WalletHub survey found that 72 million people are upset about the Fed raising interest rates, and 49% of people plan to spend less money this year as a result of Fed rate hikes,” Gonzalez said. “It makes sense that people have a negative opinion of Fed rate hikes, considering hikes have a bigger impact on debt than savings, and a lot of people have more debt than savings, to begin with.”
Are people currently worried about inflation?
“Roughly 89% of Americans say they are worried about inflation right now, according to a new WalletHub survey, and everyone else is probably either putting on a brave face or not paying attention. Even government officials who previously called inflation merely ‘transitory’ are now recognizing we have a bigger problem on our hands,” Gonzalez added. “Roughly 76% of Americans are more worried about inflation than high-interest rates right now, according to WalletHub’s survey, and 8 in 10 Americans think we’re headed for a recession.”
What advice do you have for people trying to get rid of credit card debt?
“People trying to get out of credit card debt should take advantage of 0% balance transfer credit cards while they are still available. Attractive balance transfer offers to tend to dry up during downturns, or even just periods of economic uncertainty, and most people think that’s what we’re headed for,” Gonzalez said. “Plus, a well-thought-out budget is a must-have. If you don’t get your spending under control and begin to build an emergency fund, you’ll wind up right back where you started even if you manage to get out of debt temporarily.”
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