Have you checked your credit card balance lately?

Photo (c) Dan Brownsword - Getty Images

If you’re like many consumers, it’s gotten a lot bigger

If you’re paying more money each month to keep your credit card account current, but are seeing the loan balance continuing to rise, you’re in good company. A new report from the Federal Reserve Bank of New York said that’s the situation for a growing number of people.

By the end of 2022, credit card balances totaled $986 billion – an increase of $61 billion over the previous quarter. If that seems like a big number, it is. It’s the largest increase in credit card debt from one quarter to the next since the Fed began collecting that data in 1999.

It doesn’t stop with credit card debt. The report shows overall household debt, which includes mortgages, car loans and student loans – combined with credit card balances – surged to $16.9 trillion by the end of the year.

"Credit card balances grew robustly in the fourth quarter, while mortgage and auto loan balances grew at a more moderate pace, reflecting activity consistent with pre-pandemic levels," said Wilbert van der Klaauw, economic research advisor at the New York Fed. "Although historically low unemployment has kept consumers' financial footing generally strong, stubbornly high prices and climbing interest rates may be testing some borrowers' ability to repay their debts."

It’s happening

Actually, there’s evidence that is happening. A report by Moody’s Analytics shows that by the end of the year, nearly 10% of car loans extended to people with subprime credit scores were 30 days or more behind on payments at the end of 2022.

Car prices inflated last year and auto loan rates rise every time the Fed raises its federal funds rate, putting the squeeze on more people.

“The households that were on the financial ledge to begin with might have been tipped to the point where it’s hard to keep up on the car loan and everything else, and people have to make some very hard decisions,” Pamela Foohey, a professor at Cardozo School of Law, told the Wall Street Journal.

Sandwich generation

While fears of a recession have begun to recede, it doesn’t help the growing number of people who are struggling under a mountain of debt. A study by New York Life shows members of Gen X – a demographic that usually has older children and aging parents – use their credit cards the most. 

“While financial health and confidence for Americans may differ for myriad factors, it’s worth noting that women and Gen Xers, or those within the “Sandwich Generation,” are likely parent-caregivers, handling both parent or guardian and unpaid adult caregiving roles, often leading to greater levels of stress,” said Suzanne Schmitt, head of Financial Wellness at New York Life. 

Balance transfer credit cards with several months of 0% interest are a good option to quickly put a dent in a credit card balance. So is a personal loan, which often has an interest rate half of what credit cards charge.

The ConsumerAffairs Research Team has checked out both. Here’s what he found out about balance transfer cards and here’s the scoop on personal loans.

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