(PresidentialInsider.com)- Inflation is having a monumental impact on everyday Americans. To try to keep up with soaring prices, many Americans are racking up credit card debt.
A new study released earlier this week by the Center of Microeconomic Data at the Federal Reserve Bank of New York found that there’s a 13% increase in U.S. credit card balances, when taken on a cumulative year-to-year basis. That marks the highest such jump since 20 years ago, back in 2002.
According to the report, which is conducted on a quarterly basis, total credit card debt in the U.S. stood at $890 billion by the end of the second quarter of this year. Total credit card debt jumped $46 billion in the second quarter alone, the highest increase since back in 1999.
Researchers with the Federal Reserve wrote:
“Americans are borrowing more, but a big part of the increased borrowing is attributable to higher prices.”
In other words, Americans aren’t borrowing money because it’s cheap to borrow; they’re doing so because they have no other choice to be able to afford even basic necessities.
In addition to overall credit card balances increasing, the number of new credit cards that were opened has also increased dramatically.
In fact, all debt not related to housing increased in the second quarter by $103 billion, according to the Fed report. It’s the largest such increase since back in 2016. This debt includes not just credit cards, but retail cards, other consumer loans and auto loans.
Just during the second quarter alone, total household debt in the U.S. increased 2%, all the way up to $16.15 trillion. That number is roughly $2 trillion higher than it was just before the COVID-19 pandemic, at the end of the year in 2019.
In a statement that accompanied the release of the report, Joelle Scally, who works at as administration for the Center for Microeconomic Data, said:
“The second quarter of 2022 showed robust increases in mortgage, auto loan and credit card balances, driven in part by rising prices. While household balance sheets overall appear to be in a strong position, we are seeing rising delinquencies among subprime and low-income borrowers with rates approaching pre-pandemic levels.”
Inflation hit 9.1% back in June, which has caused prices on just about everything to soar. While wages have increased this year, too, they haven’t gone up nearly enough to compensate for the rising cost of goods.
That has forced more and more people to turn to credit cards to fund their everyday necessities. The double-whammy of the situation, though, is that the Federal Reserve has been raising the benchmark interest rate quite aggressively this year to try to curb inflation. What that has resulted in is interest rates on credit cards — which typically have variable rates — to increase substantially, too, costing Americans even more money each month.
Thus far, many Americans have been able to ride the wave and not default on all this increasing debt. Will that last for much longer, though? It’s unlikely too many people will be able to handle it for a long period of time.