The Federal Reserve reports Americans have totaled a new record high of $1.21 trillion in credit card debt.
Tennessee Tech Assistant Finance Professor Dr. Justin Lee said the nation’s credit card debt has been increasing every year since 2021. Lee said some financial experts are concerned as the delinquency rate continues to increase and currently stands at nine percent.
“We are still seeing a very historically low debt-to-income ratio that is also pretty stable,” Lee said. “Meaning that compared to the entire income number that we have for the U.S. population, the amount of debt that people hold thats actually lower than many people have historically been.”
Lee also said the debt-to-GDP ratio has stayed relatively stable over the past 15 years, meaning the Americans have not diminished their ability to pay off own debts. Lee said though there may be some bright spots, he does not expect the nation’s credit card debt to come down anytime soon.
“Unfortunately, at least for the next year or two, due to the expected inflation that continues to linger and higher interest rates that many people are not used to seeing for the past almost 15-20 years now,” Lee said. “I don’t think the debt level will go down anytime soon.”
Lee said that bringing down the nation’s credit card debt is possible, but a lot of factors have to happen in order to do that.
“I believe the positive cycle of the number decreasing may arrive soon if people can start to find a better-paying job and we actually see some general wage increase,” Lee said. “Not just for some very specific sector or just one or a few companies and then as soon as the inflation gets tamed it’s just gonna form this positive feedback cycle where we can actually see people in a better financial spending to be able to exert debt.”
Lee said most people who have large amounts of credit card debt can pile up and snowball with added interest. Lee said some of the best tips to prevent large amounts of credit card debt is budgeting out before using a credit card or simply avoid using a credit card altogether.
