Americans are carrying more credit card debt than ever before.
The most recent data from the Federal Reserve show that credit card debt soared to $1.03 trillion in the second quarter of 2023. That’s an increase of $45 billion from the first quarter.
And in July, the Bureau of Labor Statistics' Consumer Price Index had risen 3.2 percent from the year before meaning people are paying more for many goods and services.
“The result of these increase in prices is that people are having a difficult time making ends meet," said J. Barry Watts, a tax strategist and retirement designer for the Wealthcare Corporation based in Springfield. "And, as a result, they’re digging into their credit cards and using those credit cards not to pay for longer term wants but to pay for everyday living expenses like food, and that’s a really bad sign.”
The increase in credit card debt comes at a time when interest rates are up. The average interest rate on a credit card now is 21 percent. And Watts said that’s making it difficult for those carrying debt to pay it down.
“That means a $100 expense on your credit card takes $121 to pay it off," said Watts. "Now, if you needed to borrow the money for the $100 purchase, what are the chances you’re going to have $121 to pay that back? Probably pretty slim to none.”
Watts said if you’re using credit cards to pay for living expenses, it’s probably a sign that it’s time to revisit, rethink and restrategize.
He urges people to deal with their debt while it’s not quite out of control and to seek advice from organizations such as Consumer Credit Counseling Service, which has offices in Springfield and Joplin.
Paying down the debt may mean spending less, going on fewer trips, not upgrading the cellphone and getting another job, he said.
It’s important to start to address your debt now, according to Watts, so you’ll be in a good position for retirement later.
