Credit card debt in the United States has hit a record $1 trillion, according to the Federal Reserve Bank of New York. This is the first time that credit card debt has surpassed the $1 trillion mark. Here’s what it means for the economy and homebuying
The increase in credit card debt is being driven by a number of factors, including rising inflation and rising costs of living. Inflation has made it more expensive for people to buy essential goods and services, which has led some people to turn to credit cards to cover their expenses. Rising costs of living have also put a strain on household budgets, making it more difficult for people to pay off their credit card debt.
The COVID-19 pandemic also played a role in the increase in credit card debt. Many people lost their jobs or had their hours reduced during the pandemic, which made it difficult for them to make ends meet. As a result, some people turned to credit cards to cover their expenses.
The increase in credit card debt has a number of implications for the economy and home buying.
- It can lead to a decrease in consumer spending. When people have more debt, they have less money to spend on other things. This can lead to a decrease in economic growth.
- It can make it more difficult for people to get approved for loans. Lenders are more likely to deny loans to people who have a lot of debt. This can make it difficult for people to buy a home or car.
- It can lead to higher interest rates. When people have more debt, they are more likely to default on their payments. This can lead to higher interest rates for everyone.
This graph shows the average credit card interest rate and you can see it’s been increasing steadily over the last few years. This has a direct impact on home affordability. As credit card debt increases, home affordability decreases. This is because people with more debt have less money available to save for a down payment or make monthly mortgage payments.
The increase in credit card debt is a serious problem that has the potential to impact the economy and home buying. It is important for people to be aware of the risks of credit card debt and to take steps to manage their debt. For homeowners that have equity in their home, a debt consolidation loan may be the get out of jail for less card that they need to reset their finances.
Here are some tips for managing credit card debt:
- Pay more than the minimum payment each month.
- Try to pay off your debt in full each month.
- Avoid using your credit cards for unnecessary purchases.
- Get a debt consolidation loan if you own a home and have equity and can’t afford to pay off your debt on your own.
It is important to take action to manage your credit card debt. The longer you wait, the harder it will be to get out of debt.