A trio of reports highlight the growing reliance that consumers are placing on credit cards to help them make ends meet, and the impact that this dynamic is going to have on their finances, especially as millions of consumers face the specter of having to restart making payments on their student loans.
Sixty percent of consumers who carry a balance on their credit card, which works out to 54 million people, have been in debt for at least a year, according to data released earlier this week by Bankrate. That figure is up from 50% in 2021. More people are carrying more debt at a time when interest rates are rising, making the job of servicing and paying down that debt even harder.
Meanwhile, the amount of consumer loans outstanding — including credit cards and other forms of revolving debt — at commercial banks topped $1 trillion for the first time ever, according to data released by the Federal Reserve Board. Data does suggest, though, that consumers have enough savings to service their debts and most are not at risk of falling behind or defaulting. But that may change in a couple of months.
Many individuals who have to start making student loan debt payments again in October are likely to struggle, according to a growing number of reports.
Smart consumers will prioritize making payments on the items that are most likely to affect their credit score, according to one personal finance expert. After that, smart consumers will do whatever they can to make sure they are not accruing interest and falling further behind on their debts.
In what be surprising to many, the more money that people make means that they are more likely to be carrying credit card debt, rather than having more money to pay it off, according to Bankrate. More than 70% of consumers who make at least $100,000 have had some amount of credit card debt for at least a year, compared with only 53% of those who make less than $50,000. When looking at a five-year window, consumers making $100,000 are twice as likely to have been carrying debt for that long, compared with consumers making under $50,000.
