Consumer credit data from the Federal Reserve says Americans now carry over $1 trillion in credit debt.
Bruce McClary, with the National Foundation for Credit Counseling, says credit card interest rates are in the low- to mid-20% range for people who have average credit.
"If you take a closer look at that trillion dollars and what pressure that places on people's budgets, you begin to see where the problems are going to be in the months ahead," McClary says.
He says another factor he's watching is the high cost of living. He says people rely more on their credit cards to fill in areas of their budget like groceries. Even though inflation has slowed, prices on many items are still higher than before the pandemic.
"Incomes in many cases haven't kept up with that increase in cost of living. So, while the rate of inflation growth is actually slowing down, what we're what we're seeing is that when you go to the grocery store or where you buy consumer goods in the marketplace, you're not seeing those prices come down," McClary adds, "People are not really as worried about their finances in the year ahead. And that may be true, because at this moment in time the bills aren't coming due for all the holiday spending that took place that push that debt even higher. I think once those bills come due and people find out that they really don't have the ability to pay more than minimum payment or even make the minimum."
What's the solution? McClary says there are ways to make your debt more manageable. If you have a really good credit score right now, go out and look for opportunities to transfer the credit card balance that you owe that may be carrying a higher interest rate, and take advantage of introductory offers that give you the opportunity to pay down your credit card debt at a significantly lower interest rate.
"If you don't have great credit, or you're already falling behind, you should turn to a nonprofit credit counseling agency. If you go to nfcc.org, you can connect with a nonprofit credit counselor who can help you overcome some of the challenges that are in front of you. If you're having difficulty balancing your budget and finding room to make your credit card payments, and if you're already behind on your credit card payments, they can work with you to find affordable repayment solutions that get you back on track," McClary says.
He adds that even if you're not on the edge or behind, now is a great time to meet with a credit counselor and find out how you might improve your debt situation.
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