Ever Increasing Numbers Of Americans Getting Trapped In Credit-Card Debt

By Keith Thuerk | Financial Stewardship | 18 Oct 2024

No question, about it that Americans have been suffering from Inflation, rising prices on everything. Here are my observations, once the lockdown stimulus checks were used up buying trinkets and stuff from overseas the average US consumer started to empty out their Bank account reserves. If my estimate is correct those reserves ran out about two-years ago.... next up for use/abuse is their credit cards.

The average American has between four and six credit cards to their name(s). And consumer Credit Card debt soared above $1 Trillion in the 2Q24, due to inflation stressors, I envision this value has only gone higher! Did you know that credit card rates at 4-6 times the federal funds rate? The average APR offered with a new credit card today is 24.72%, down from 24.92% last month. The slight decrease is not enough to make a difference when the consumers are making only minimum payments.

I am not buying the media all is well narrative with the consumer and economy narrative. Here's a couple examples why, consumer auto loan defaults are up. Credit card delinquencies are up. Rent and Mortgage late and delinquencies are hitting levels not seen since 2000 & 2009. One could surmise there is a pattern, but I am not an economist nor a politician. Just pointing out the data points!

So the cycle is they get behind on payments and the enormous APR starts working against them and they get further and further behind. It a vicious cycle for certain! It might even be a powerful enough force to fully destroy the US middleclass, I shudder at that thought at how bad this Holiday shopping season will turn out for US retailers!

So what's up next?

A very difficult decision - “Chapter 7 filings—a lifeline for many struggling households—increased by 44.77 percent year over year,” the report stated, also noting an “unprecedented surge in Chapter 13 filings,” which are filed by individuals who hope to hold on to essential assets like their homes and cars, and which increased more than 21 percent year over year.

Alternatives - seek out a non-profit based credit counseling service to help get you back on track.

Deleverage - sell off as much as you can to raise some capital