AUS credit card debt continues to swell amid runaway inflation, average annual percentage rates for new credit cards are at record highs.
“Credit card interest rates are basically the highest they’ve ever been. I’ve been monitoring credit card rates on a monthly basis for over a decade now. And that’s the highest they’ve been since I’ve been watching them,” said Matt Schulz, chief credit analyst for LendingTree. Yahoo finance.
The average credit card interest rate was 20.17%, according to a June analysis by LendingTree, an internet lending marketplace. June marked the first time the average rate exceeded 20% since the survey began in 2018, according to the company. The survey reviewed over 200 popular credit cards.
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Rising credit card interest rates coincide with high levels of credit card debt. Recent data from the Federal Reserve revealed that credit card balances in the United States reached $841 billion during the first quarter of 2022, according to CNBC. Although below the all-time high of $930 billion set in 2019, the recent trend is upward.
“The disturbing truth is that we are nowhere near the top,” Schulz added, according to the outlet.
Schulz encourages borrowers struggling with higher rates to consider negotiating with their lenders, according to the outlet.
If debt continues to rise and the Fed continues to tighten monetary policy, credit card interest rates could rise even higher.
Credit card debt levels plummeted during the pandemic as people started getting stimulus checks and started consuming less. Traditionally, national credit card debt levels decline during times of economic turbulence such as the pandemic or the Great Recession, according to Schulz.
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Some economists fear the country is heading into a recession, with some projections indicating the US economy will contract for a second straight quarter – which has sometimes been used as the definition of a recession in places like the UK.
Ever since the economy began to open up to the pandemic, America has been mired in an inflation crisis. In May, inflation rates soared to a 40-year high, prompting the Fed to announce plans to raise the federal funds rate by 75 basis points, the biggest increase in about three decades. The Fed manipulates the federal funds rate to influence rates for other types of loans, such as auto loans and mortgages. The theory is that by raising the rate, loans will become more expensive and consumers will borrow less, which will cool runaway inflation.