An increasing number of Americans are struggling with credit card debt in 2022.
According to a recent poll from CreditCards.com, 60% of people who have credit card debt in 2022 have owed their creditors for at least 12 months. That’s a 10-point increase from the data collected on the same question during a 2021 poll.
Combine that with the fact that the interest rates (APRs) on credit card purchases are higher than they’ve been in decades, and we have a recipe for financial hardship for those who are running balances on their credit cards.
This has money expert Clark Howard concerned.
“Right now, a lot of people are in pain financially,” Clark says. “The brutal cycle of inflation has really hurt a lot of people, and it means you’re straining to pay those bills. So this seems like a solution: getting yet another card that buys you a little more time. But then you get the huge amount of interest and (potentially) a huge amount of debt.”
In this article, I’ll take a look at some of the latest data on consumer debt, get Clark’s opinion on what it means and provide some potential solutions to help those with credit card debt get out from under it as soon as possible.
Credit Card Debt Data: 3 Worrying Signs in 2022
There is a group of troubling signs in the credit card market that points to debt becoming an increasing concern for consumers.
Let’s look at three recent trends that highlight what we’re up against in 2022.
Credit Card Use and Debt Are Up
According to the latest data released by consumer credit report agency TransUnion, the number of Americans who have acquired access to a credit card was up year-over-year in the second quarter of this year.
That statistic, in itself, isn’t necessarily a bad thing — if the cards are being used responsibly.
But the accompanying debt number also was up, with the average American now carrying nearly $500 more in credit card debt than at the same time last year.
|Key Metrics||Q2 2022||Q2 2021|
|Consumers with Access to a Credit Card||161.6 million||153.3 million|
|Average Credit Card Debt per Borrower||$5,270||$4,817|
Credit Card APR Interest Rates Are High
Just as more people are relying on credit cards to help make ends meet, they’re finding that they’ll owe more in interest than they have in decades.
That makes the decision to rely on credit cards to bridge the budgetary gap even more expensive.
According to a recent report from Bloomberg, credit card interest rates are higher than they’ve been since 1996.
As of mid-September 2022, CreditCards.com cited the latest national average for credit card APR at a whopping 18.17%. For points of reference, the national average was as low as 10.7% in April 2009 and was 16.2% 12 months ago.
And that number is even worse for new applicants, with Wallet Hub’s latest analysis putting new credit card APR offers at an average of 19.88% compared to 15.13% for existing users.
More of This Debt Is Long-Term
Not only are there more Americans carrying balances with interest rates that are higher than ever, but there also are signs that more consumers are holding long-term credit card debt.
Recent data from the CreditCards.com study referenced in the opening of the story found these trends:
“Among Americans who carry over credit card debt from month to month, 60 percent have owed their creditors for at least 12 months.
“Additionally, 40 percent of these Americans say they’ve had their credit card debt for at least two years, 28 percent for at least three years and 19 percent for at least five years.”
That 60% number was just 50% when the same study was conducted in 2021.
Clark’s Take on Elevated Credit Card Debt and Rising APRs
As you may have been able to predict, the hardship consumers are experiencing with credit cards has been a frequent topic on the Clark Howard Podcast in recent weeks.
On the August 2 episode, Clark discussed the root issues involved with the increasing numbers on credit card debt.
“As the Federal Reserve raises the interest rates and controls, what happens is there’s a direct effect, typically one billing cycle later, on the interest rates on your credit cards,” Clark says. “And people have been charging it up like crazy lately. That’s leaving balances people can’t pay.
“A lot of people intend to use credit cards as a payment system, but either because of the expenses they’re facing — because of life, or inflation, or something happened medically or at work or whatever — they’re running up balances at these very high rates.”
On the September 15 episode of his podcast, Clark tackled the “credit card trap” card issuers are setting by increasing the number of solicitations and bonus offers alongside their high APR interest rates.
He says the big banks are taking advantage of many consumers’ needs for financial help in these trying times by sending promotional mailings more frequently and upping their welcome bonuses.
“Don’t fall for their game,” Clark says. “Don’t say, ‘Hey, look at this! Look at this fantastic offer I got from Chase today! Look what they’re offering me with this Citibank thing! Look at this: Wells Fargo’s offering me $200 to get a card and I don’t even have to pay an annual fee for it.’ I mean, who wouldn’t do that? Right?
“They’re baiting you. They’re luring you in. It’s like the fisherman with the bait on the end of the hook. And they want to reel you in. And they want to own you. That’s what this game is about. Don’t play their game. Don’t do it.”
Tips for Eliminating Credit Card Debt
So now that we know there’s a problem, you may be wondering how you can combat the risks associated with credit card debt in your own life.
Team Clark has some great resources for those of you already feeling the pain of credit card balances, such as a plan for getting out of credit card debt in three years or less and how to get out of debt in seven steps.
No matter where you stand with credit card debt, you’ll find that budgeting is essential to any of these plans for a couple of reasons.
First, you have to create a budget and adhere to it in order to ensure that you live on less than you make. Then you can start paying off credit card debt.
Second, budgeting helps you take a deeper look at your spending habits to eliminate any frivolous or excessive purchases. This will allow you to reallocate those funds to essentials like debt reduction and savings.
If you’re ready to start budgeting, or if you want to see if your budget looks the way it should, Team Clark has some resources to help you get started. Take a look at our free budgeting worksheet as well as our recommendations for downloading the best budgeting app available.
In addition to budgeting, Clark also has some old-fashioned advice on how to tackle this “plastic problem” head-on: Start using cash instead.
“What I have found over and over again is that if people pay for everyday life with cash, it is amazing how their finances get under better control,” Clark says. “You take out a certain amount of cash on payday and that cash had to stretch to the next payday. It changes how you do things.
“One of the things we’ve lost with plastic is the sense of the finiteness of money. And so we get into a thing where we don’t even have a sense of how much or how little is left because we just pull out our phone and use Apple Pay or Google Pay, or we pull out a piece of plastic, and we lose track of it.
“Cash is the truth serum to get the spending that ‘just kind of happens’ back under control.”
Do you have credit card debt and need of help? Contact our Consumer Action Center at 636-492-5275. Or do you have a credit card payoff success story you’d like to share? We’d love to hear all about it in the Clark.com community!