Data from the Federal Reserve Bank of New York, a subsidiary of the Federal Reserve, recently released data for the second quarter of 2023 showed that the size of credit card debt in the United States reached $1.03 trillion, exceeding trillion dollars for the first time, and the serious delinquency rate also reached the highest in 11 years. Behind the surge in credit card debt is the pressure on ordinary Americans to double their living expenses.
Credit card holder Derek Vaughn: I remember several times I was about to cry, I talked to the credit card issuer, but they didn't want to help me.
Derek Vaughn is an average credit card holder in the United States. He found himself mired in credit card debt, which now stands at $60,000. Vaughn said that after he had a child, his living expenses have been increasing, and the rise in prices and interest rates has doubled his pressure, and he can only use credit cards to make ends meet.
American analysts point out that cases like Vaughn's are not a minority. The increase in credit card debt in the United States reflects the rising debt of American households, and many expenses are indeed difficult to avoid.
Yahoo Finance Channel analyst Akiko Fujita: This number is very anxious, and you have to look at this number in the overall context. According to the Federal Reserve Bank of New York, total US household debt reached $16.9 trillion in the fourth quarter of 2022. Millennials are the most heavily indebted, with debt hitting a new high in their 30s.
CBS host: Car prices, the cost of raising children, mortgage prices, and interest on debts are all rising. You need a place to live, you need a car to commute, you need someone to watch your children at work, and you have debts to pay off.
According to US media estimates, in the United States, credit card holders have an average of $10,000 in credit card debt, and the interest rate on credit card debt has exceeded 20%, if you have a difficult life, only the minimum monthly repayment of $250, it takes about 7 years to pay off, and the total repayment reaches twice the amount of debt. And that's when you no longer use a credit card.
Credit card holder Derek Vaughn: You can't just make the minimum payment every month, you can't get out of it, and you feel like you're drowning in debt.
High inflation and rising interest rates have left some credit card holders unable to service their debts
Under high inflation and high interest rates, credit card debt in the United States continues to climb and break through the $1 trillion mark. And with the arrival of autumn, more pressure is yet to come.
U.S. credit card debt rose $45 billion, or 4.6 percent, from the first quarter of this year, up 16.2 percent from the same period last year. According to the analysis of the Federal Reserve Bank of New York, the reasons include the overall rise in prices in the United States and the increase in interest rates caused by the Fed's continuous interest rate hikes.
CBS financial reporter Megan Cherullo: Inflation has made more people pay for fixed living expenses with credit cards, but they have no way to repay them, and they can only default month by month because they really can't pay back. Another factor exacerbating the credit card debt problem is the interest rate on credit card borrowing, which has reached a new high of nearly 21%, and the high cost of delinquent credit card debt.
Affected by rising interest rates, some U.S. credit card holders are also facing insolvency. In the second quarter, about 5.08 percent of credit card loans fell into serious delinquency, or more than 90 days in arrears, significantly higher than 3.35 percent in the same period last year.
Meanwhile, the pause on student loan payments in the U.S. will end at the end of August, and interest will begin to resume accruing from September and payments from October. Against the backdrop of high inflation and high interest rates, the repayment of student loans is also much more difficult and heavier than in the past.
Thomas, analyst at the American Financial Management Company: Student loan payments started to be paid in October, which is worrying.
Persistently high inflation and rising interest rates over the past year have left many people deep in debt. Some industry insiders predict: "In such an environment, the rise in credit card debt may not stop there." ”
Ted Rothman, senior market analyst at Bankrate: This highlights the cumulative effect of inflation, but also the cumulative effect of high interest rates.
Source: CCTV News