The American Bankruptcy Institute recently reported Americans owe more than $1 trillion in credit card debt.
In the past two years, credit card debt has risen by about $250 billion in the wake of the COVID-19 pandemic. This rise in debt is a large contrast when compared to 2021, where credit card companies saw Americans paying off a significant amount of debt. The efforts seen to pay off individual debt can be attributed to the amount of money people saved in the year 2020 during the pandemic.
With businesses being closed and social distancing in full effect, people were less likely to spend money on outings. Americans were also receiving stimulus checks and unsure about what the future held, leading them to save.
But as pandemic-related restrictions eased, consumer spending habits have come back in full force.
Today, the average American household has accumulated $10,000 in credit card debt. Additionally, the Hill reports, interest rates have risen 4% in the past year, making the current interest rate average on credit cards a whopping 21%. This amount of debt paired with record high interest rates can cause monthly payments to significantly hurt efforts to pay off balances.
One year ago, these increased interest rates affected a much smaller portion of Americans. Bankrate reports that the number of credit card holders who carry debt, and subsequently interest, month to month has jumped from 39% in 2022 to 46% in 2023. Typically, Americans begin to pay off their debts in the first few months of the year, but in 2023, this was not the case. The average credit card debt has not made any declines and is expected to jump in the next few months due to summer travel.
For people with a high amount of credit card debt they are unable to pay off, filing for bankruptcy may be a viable option. Bankruptcy forces creditors to stop all collection actions and participate in the bankruptcy process. This can then result in a tax-free discharge of debt.
If you have questions about your credit card debt, or are considering filing for bankruptcy, contact Sader Law Firm at (816) 561-1818 for a free phone consultation.