Why experts are warning consumers should pay off their credit card debts sooner rather than later
US credit balance soars over $1.1 trillion, above pre-pandemic records according to Fed data
US ramps up credit card debt to record levels as inflation soars
FOX Business' Madison Alworth speaks to Bankrate.com senior analyst Ted Rossman on why consumers need to deal with their credit card debt sooner than later.
As some economists predict interest rates to hit recession highs through this year, credit card experts are advising consumers to pay off credit card debt sooner than later.
"There's a lot of people worried about a recession," Bankrate.com senior analyst Ted Rossman told FOX Business’ Madison Alworth on Wednesday. "I mean, there's sort of only one way for these things to go."
The Federal Reserve’s monthly revolving credit report, which includes credit card balances, reported a $1.103 trillion balance, rising year-over-year by more than 19% and surpassing pre-pandemic levels.
And as rates are expected to rise 75 basis points as indicated by the Fed Wednesday, Rossman warned credit card interest carries the largest borrowing rate at above 16% and could create an even bigger debt problem in the coming months.
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"I don't really see any large-scale caution right now, but I also know that things change fast," Rossman explained. "And we are talking right now about significantly higher interest rates, the stock market's way down."
Bankrate.com senior analyst Ted Rossman discusses how "significantly higher interest rates" can create a bigger credit card debt problem on "Varney & Co." Wednesday, June 15, 2022. (iStock)
Consumers have already shown signs of adjusting habits, as May’s retail sales report missed growth estimates and instead fell by 0.3%.
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The data comes as consumers face the worst inflation spike since 1981: The government reported last week that the consumer price index climbed 8.6% in May, much higher than economists expected.
The reading underscored how strong inflationary pressures in the economy still are.
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"Sales plunged on an inflation-adjusted basis, paring most of April’s gains," said Tuan Nguyen, U.S. economist at RSM. "That implies more headwinds to consumer spending in the second quarter. But it won’t be the Federal Reserve’s top concern as it focuses on reducing inflation."
FOX Business’ Megan Henney contributed to this report.