27 Sept 2021
U.S: Credit Card Debt is Rising Again
The Index Today
Credit Card debt in the U.S saw a decline during the pandemic but is now creeping back up as restrictions begin to ease.
The pandemic forced Americans to stay home which led to a drop in average spending levels. In addition to this, the government provided emergency cash assistance which helped minimized credit card bills.
According to a study conducted by Bankrate, 42% of people with credit cards which is approximately 59 million Americans, have increased their balances since the pandemic began. Bankrate Senior Analyst, Ted Rossman said, “Things are better for some, but they are not better for everybody.”
Declining stimulus checks and unemployment benefits have added to the problem of growing debt in the country. The quarterly report on household debt and credit released by the Federal Reserve Bank of New York showed credit bills increased by $17 billion in the second quarter of 2021. This was the first rise recorded in almost four quarters.
However, not all debt can be categorized as the same. According to Bankrate, credit card debt is ranked as the most harmful and can be difficult to manage with high interest rates. Many people are unable to break the debt cycle due to late fees and missed payments.
Real estate firm, Clever, reported that one in five credit card holders have bills over $20,000 whereas 14% of people with monthly balance credit cards have been unable to clear all due since 2018. Francesca Ortegren, lead researcher at Clever said, “We also found that 57% of people had missed a credit card payment and the majority of those were in the past year. It could cause a snowball effect over time, and make it much harder to climb out.” Although the credit card bills seem to be on a rise, the amount is still below the 2019 levels. Student loan debt has seen a drop of $14 billion during the second quarter of the 2021.