America faces a staggering $1.14 trillion in credit card debt as inflation strains household finances.
At a Glance
- One in three Americans has maxed out their credit cards amid rising inflation.
- U.S. credit card debt reaches an unprecedented $1.14 trillion in 2024.
- Lower-income Americans most affected by rising costs and increased dependency on credit.
- Bankrate survey shows vulnerable groups are most impacted by credit card debt.
Inflation Drives Credit Card Debt Crisis
A time of continuous inflation under the Biden-Harris administration sees 37% of American credit card holders facing their credit limits, according to a Bankrate/YouGov survey. Escalating living costs and interest rates have resulted in Americans increasingly relying on credit. Credit card debt has drastically increased, growing by $372 billion since early 2021 to reach $1.14 trillion in 2024.
Credit dependency is being driven by those facing the brunt of financial instability — primarily individuals from lower-income backgrounds. A study indicated that 35% of Americans have maxed out their cards, with inflation being the primary reason. Furthermore, about 22% owe between $10,000 and $20,000, underscoring the serious financial impact on families and individuals living paycheck to paycheck.
Legislative Actions and Consumer Behavior
A House panel recently approved legislation to repeal the CFPB’s rule capping credit card late fees at $8; however, its prospects in the Senate remain slim. At the same time, research shows that Americans prioritize credit card rewards and features, with cash back cards being the most sought after, despite mounting debt.
“As long as inflation remains elevated and the cost of goods remains so as well, balances…are likely to continue to grow,” said Jason Laky, executive vice president, TransUnion.
Learners from younger generations, notably Gen Z, are being heavily influenced by social media trends and “buy now, pay later” apps, which contribute to increasing credit habits and impulsive spending. Such trends lead young consumers to amass more debt.
Inflation drove many young Americans to credit cards to cover costs, leaving them with bigger balances https://t.co/xCtkbKd7i8 via @WSJ
— Imani (@MoiseNoise) May 7, 2024
Potential Financial Instability
Many lower-income Americans turn to debt to afford essentials, navigating an economic milieu characterized by soaring prices and elevated credit card rates. As inflation affects every income level, individuals are not only grappling with maximized credit card limits but also rising debt delinquency rates, threatening the nation with potential long-term financial instability.
“Household debt and credit are growing at an alarming pace,” said Achieve’s cofounder Andrew Housser. “For many consumers, money is going out the door as quickly as it’s coming in, if not faster.”
Efforts to mitigate scam-related losses persist, with $217 million lost to gift card scams alone in 2023. On a broader scale, the increase of $372 billion in credit card debt since early 2021 has prompted serious reflections on financial sustainability and resilience amid inflationary pressures.
