TAMPA, Fla — Inflation isn’t stopping people from opening up their wallets. Americans are racking up credit card debt even as interest rates hit a multi-decade high.
“I think we've seen an alarming increase in credit card debt this year... With inflation and with the increase in prices, we're seeing lots of credit card debt begin to accumulate," Stephen Patterson, Chief Financial Strategist at KeyCity Capital, said.
Credit card balances climbed more than 15% from a year ago, the largest annual jump in more than 20 years, according to the Federal Reserve Bank of New York.
"Things are a lot more expensive; I’ll say that. Definitely spending a lot more on things, so probably, yes, spending more on the card than usual, for sure... But I know a lot of people that are relying on them. I been there before too," AJ Alexander, a shopper in Tampa, said.
More than 191 million Americans have at least one credit card and some 555 million people have more than one.
"Sometimes I use credit cards and then I try to pay a pretty good amount at the end of the month so they don’t climb so high. Sometimes I have to control myself with that... I try to not be shocked after Christmas and say omg, look at this. I try to control it. My kids may disagree with what I'm saying," another shopper, Olga Rhoads, added.
Americans racked up 38 billion dollars in credit card debt from a year ago.
"At some point, the party stops. And so you know, there's an inability to pay that bill or there's an ability, inability, to get additional credit,” Patterson explained.
Patterson urges people not to use their credit cards or similar methods to finance everyday lifestyle choices.
"The buy now, pay later strategy only works is if you have the money now because what happens to the American family is an emergency occurs. And so they're two payments into the buy now, pay later and a medical bill arises or a car issue arises,” Patterson added.
Patterson said credit card balances continue to surge even as interest rates that lenders charge consumers hit record highs.
"Last year, the average interest rate on a credit card was about 18%. Today, it's about 24% and I don't think we've seen that top out yet. So, anybody that's putting debt on credit cards and planning on making minimum balance payments, that minimum balance payment is going to go up sharply," Patterson said.
Patterson strongly suggests living below your means until we see record inflation and interest rates come down.
"You just have to make sure you have money coming, in you know? Don’t start feeling like you have more money than you have because that limit is high. You want to make sure that you have something to supplement that. Make sure it’s a revolving door," Alexander added.
