(KTLA) — Rising interest rates coupled with crippling inflation have sent more Americans into debt using credit cards to pay for everyday necessities.
Credit card debt has surged over the past year as more Americans borrow money to keep spending. And with interest rates set to go up again, it might be even harder to break free of that crushing debt.
Many people are having to use credit to pay for essentials such as groceries and gas — items that have gone up in cost much faster than average earnings.
Budgeting is also becoming critical as people buy what they need, not what they want.
According to LendingTree, an online lending marketplace, the typical consumer has racked up more than $6,500 in credit card debt.
Matt Schulz, LendingTree’s chief credit analyst, said it’s not the worst it’s ever been, but it’s in that direction. He called it a troubling trend.
“The average rate on a new credit card offer today is a little over 21%,” Schulz said. “It’s as high as it’s ever been and the really unfortunate thing is that it’s only going to keep going higher.”
Record inflation has about two-thirds of consumers scaling back on discretionary spending. That’s hurting electronic and clothing retailers.
Growing debt could soon impact many credit scores, resulting in fewer people being able to qualify for cars or homes. This comes as home prices are starting to decrease. However, mortgage rates are rising with a 30-year fixed rate now above 6%.
Cody Rice-Velasquez is among those who have recently tackled credit card debt.
“I don’t want to get back in that hole because we were paying about $1,000 a month in interest,” Rice Velasquez said.
What’s the best way to break the cycle of debt? Experts say it’s important to have an emergency fund.
“Have a little bit of extra savings on hand so you don’t have to pull out the credit card the next time you have a flat tire or you have to take the dog to the vet,” Schulz said.