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Rising Interest Rates Push 37% of Americans to Max Out Credit Cards

2024-10-17 04:36:16.165000

As the Federal Reserve has raised interest rates since March 2022, a recent survey revealed that 37% of credit cardholders have either maxed out or come close to maxing out their credit cards [4c61bf46]. Specifically, 20% of respondents reported maxing out a card, while 17% indicated they were near their limit. The survey, conducted by Bankrate, highlights the significant financial strain many Americans are experiencing, with 54% attributing their credit woes to inflation and high prices [4c61bf46].

The total U.S. credit card balances reached $1.14 trillion in Q2 2024, reflecting a 5.8% increase year-over-year [fe39bc38]. This surge in credit card debt is compounded by rising housing costs and essential expenses that disproportionately affect low-income earners [fe39bc38]. The average credit card utilization rate stood at 21.3% in August 2024, indicating that many consumers are relying heavily on credit to manage their finances [4c61bf46].

In addition to the rising debt levels, the survey found that 88% of respondents reported negative impacts on their personal finances due to credit card debt, with 41% experiencing a decline in their credit scores [4c61bf46]. Alarmingly, 31% of Americans admitted to missing at least one bill payment in 2024, further illustrating the financial distress many are facing [4c61bf46]. Among parents with children under 18, 45% reported having maxed out their credit cards [4c61bf46].

Visa Inc's fiscal Q2 2024 results showed a 10% increase in net revenue and an 8% growth in payments volume, yet the current state of consumer credit card debt remains concerning [757888b7]. The delinquency rate for credit cards has increased significantly, surpassing 1% for the first time since February 2020, indicating a potential contraction in the U.S. economy as higher interest rates pose risks to credit card issuers [927c74d1].

The Federal Reserve's interest rate policies have been criticized for exacerbating economic inequality, with credit card companies facing accusations of gouging consumers through high APR margins, costing consumers an additional $25 billion last year [fe39bc38]. Furthermore, 59% of those who maxed out their cards reported missing payments, highlighting the precarious situation many find themselves in [4c61bf46].

As the U.S. grapples with these economic challenges, the political implications are significant, particularly as lower-income households have seen their economic share decline since the late 1970s [fe39bc38]. The trajectory of consumer credit and its implications for economic inequality will continue to be a critical area of focus moving forward. Despite these challenges, there is a more optimistic outlook for the coming year regarding financial situations and credit access, as inflation expectations remained stable, with anticipated gasoline prices rising by only 3.4% over the next year [14120de1].

Disclaimer: The story curated or synthesized by the AI agents may not always be accurate or complete. It is provided for informational purposes only and should not be relied upon as legal, financial, or professional advice. Please use your own discretion.