More Americans carry credit card debt from month to month amid inflation, study says

While some progress has been made and November marked the lowest annual rate increase since December 2021 (coming in at 7.1% compared to analysts’ predictions of 7.3%), consumers will have to change their spending habits to cover it. basic cost.

Many people choose plastic.

Americans tend to use credit cards to make ends meet

A new report by Bankrate found that 35% of US adults have monthly credit card debt, up from 29% last year and 46% of credit card holders have monthly debt on at least one card, up from 39% last year. year.

What’s more, in addition to higher debt balances, 43% of US adults with balances are unaware of all the interest rates that can lead to a vicious spiral of debt if not managed carefully.

Currently, the average credit card interest rate is 20.04%, according to Creditcards.com.

“Many people go into credit card debt because of emergency expenses — for health, housing or cars — or simply because their everyday expenses are more than they can afford,” says Bankrate.com Senior. Industry Analyst Ted Rossman. “The challenge has become important due to high inflation and higher interest rates.”

Why consumers should be selective about their credit card usage

Sometimes, there is no choice but to lean on a credit card to cover your expenses quickly. But using this payment method can bring its own risks.

“No one chooses to have credit card debt, though. If you don’t have money and need groceries or gas, those expenses can go on your credit card,” Rossman said. “It’s a cycle of debt that’s easy to get into and hard to get out of.”

Excessive use of credit cards can lead to…

• High interest charges: With credit card interest rates reaching record highs, carrying a balance on your credit card can result in high interest charges that can make it difficult to eliminate your debt balance.
• Lowering your credit score: Your credit score is calculated by considering several different factors. This includes payment history and balances. Missing payments because your balance is unmanageable or spending more than 30% of your credit limit can hurt your credit score.

An alternative to high interest credit cards

If you’re struggling to cover your day-to-day expenses, a credit card can provide a quick solution. But if you’re hoping to avoid a debt spiral, you may want to consider a long-term solution. Some alternatives to relying on credit cards may include:

1. Raise an emergency fund: Without an emergency fund, the smallest unexpected expense (or increase in regular expenses) can throw off your finances. Aim to save a little each month in an emergency fund. After all is said and done, experts say your emergency fund should be enough to cover three to six months of regular expenses. During high inflation, you may want to revisit this amount to determine if you should set aside extra money for higher expenses.
2. Looking for ways to increase your income: Getting busy or asking for a raise at work can help offset the burden of higher prices. Increasing your income can be as simple as asking your employer to reevaluate your compensation and adjust additional responsibilities or positive performance. If the answer is “not now,” consider how you can use your free time and skillset to start a profitable side business.
3. Looking for ways to cut costs: If you’re spending more on groceries, household expenses, or gas, you may want to review your budget and look for other areas where you have wiggle room to reduce your spending. Maybe you spend less to eat out to account for higher gas prices or cut out one of the streaming subscriptions. Small changes to your spending can add up big time.

“It’s easier to get out of credit card debt if it’s a one-time shock, because you can overcome it with a 0% balance transfer card or a personal loan or a debt management plan offered by a reputable non-profit credit counseling agency,” said Rossman. “If your finances are going down every month, then you need a more systemic solution.”