Credit card debt outstrips emergency savings, study finds

In a survey released this Thursday by financial services firm Bankrate, it was found that 36% of Americans have increased their credit card debt, which exceeds their emergency savings.; According to the banking institution, this is due to persistent inflation, which threatens the country, despite the efforts of the Federal Reserve to reduce it to 2%.

This new debt figure exceeds the 27% recorded in 2022. According to Mark Hamrick, senior economic analyst at Bankrate, “Many resort to using their emergency savings if they have any, or have acquired credit card debt or some combination,” according to Hamrick. It comes amid severe economic turmoil that has “double-edged damage to Americans,” he said.

He also mentioned that this situation is exacerbated by the problem of high interest rates, “punitive for those who do not pay their balances immediately,” the analyst said. In early February, the financial institution also detailed how the annual interest rate peaked at 19.14%, the last record in July 1991.

A recent Financial Security Index report showed that about 27% of Americans have used their savings in recent months to make ends meet, and 54% have used the money to pay for basic services and food. This is due to the fact that wages do not correspond to the amount of profit. inflation that continues to drive up prices and scatter the purchasing power of citizens.

For this reason, according to CreditCards, in its latest analysis, published in January, it was stated that about 72% of the adult population got into credit card debt, of that percentage, half took on additional debt, and 38% increased their balances as interest rates rose.

The Federal Reserve Bank of New York reported in the first week of February that US household debt peaked at $16.9 trillion in 2022., which means that in the fourth quarter of the year, domestic debt was about $394 billion. Similarly, credit card balances reached $989 billion.

Why Americans are more “careful” with their spending, according to the Fed

72% of U.S. credit card debtors increased their balances in 2022

Author: Arlenis Tabare
Source: La Opinion

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