Financial analyst provides insight into US credit card debt and how to fix it

SALT LAKE CITY (ABC4) – Recent media coverage has given much attention to the national economy, covering topics such as interest rates, housing markets and the national deficit. Average American workers, however, are more likely to suffer from the burden of personal credit card debt.

ABC4 spoke with Ted Rossman, Senior Industry Analyst at Bankrate.com, about the New York Federal Reserve’s report on US credit card debt. The report includes all credit card debt for the first quarter of 2022.

Rossman expected to see an increase in total US credit card debt, but was surprised that the report showed a slight decrease in total debt since the fourth quarter (Q4) of 2021. He reports that Americans had a total of $841 billion in credit card debt. in the fourth quarter of 2021. This figure fell to $770 billion for the first quarter of 2022, according to the report by the Federal Reserve Bank of New York.

Rossman frames these results by explaining how the fourth quarter of 2019 held the record for the highest total amount of credit card debt nationally, and how the COVID-19 pandemic likely explains steady decreases in debt. credit card debt through the fourth quarter of 2021. He says people spent less overall during the pandemic and said they paid off some of their credit card debt with government stimulus money. “The real anomaly is the amount of credit card debt that has plummeted during the pandemic,” Rossman says.

Easing COVID-19 restrictions likely caused credit card debt to rise in the fourth quarter of 2021, in addition to the usual higher spending trends in the fourth quarter of most years, Rossman says. He says he expected this trend to continue through the first quarter of 2022 and was surprised it didn’t. “Balances are even higher today than they were a year ago,” Rossman says, commenting on how recent trends represent more of a plateau in credit card debt than a significant decline. .

“People frequently pay off their credit card balances in the first quarter of every year,” Rossman continues, indicating that the recent drop in total credit card debt is something that typically happens every year.

Rossman notes how the 2008 financial crisis may be a good predictor of how we’ve seen credit card debt trends change in the United States during COVID-19, and how they might change in the future. He says the crisis took “five years to find the bottom” of total credit card debt, and another five years to reach the highs seen in 2018 and 2019. Rossman predicts a similar process will occur after COVID- 19, indicating that we may only be at the beginning of the recovery of the total national credit card debt.

As for why credit card debt in the United States is a compelling statistic, Rossman says it can provide insight into total consumer spending and the health of the economy. “Things can feel really bad right now,” Rossman says of high interest rates and high debt levels, but he says high levels of credit card debt can also indicate an increase. spending by consumers who benefit from an excellent labor market. In short, he says, in some ways high national credit card debt can demonstrate how an economy is recovering from a crisis.

Rossman acknowledges the enormous burden of credit card debt felt by many American households. “Those with average credit card debt in the United States are likely to take 16 years to pay off their debt at high interest rates,” Rossman says.

It offers several solutions for households suffering from high levels of credit card debt.

In addition to making full payments on credit card balances, people should consider taking out low-interest loans or 0% balance transfers to pay off debt at a lower interest rate. .

Rossman says most people with a credit score above 670 should qualify for this type of loan. Otherwise, Rossman suggests seeking help from a nonprofit credit counseling company, such as Money Management International.

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