Americans Adding Credit Card Debt to Avoid Inflation

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Last updated on April 6th, 2023

Americans are acquiring more credit card debt than ever as inflation squeezes consumer finances. New figures from the Federal Reserve Bank of New York show that Americans added $46 billion to their credit card balance in the second quarter of 2022, taking U.S. household debt past $16 trillion for the first time.

Credit Card Debt Rises as Inflation Bites

Over the past year, credit card debt has jumped by $100 billion, or 13%, the most significant percentage increase in over 20 years. At the same time, the data showed that more Americans’ debts were delinquent on credit cards, auto loans, and more.

Despite the rise in delinquencies, The NY Fed said the share of current debt transitioning into delinquency remains “historically very low,” though it did increase modestly.

“Although debt balances are growing rapidly, households, in general, have weathered the pandemic remarkably well,” the New York Fed said in the report. The Fed notes this resiliency due to unprecedented federal government financial assistance during the pandemic – including multiple cash payments to Americans.

Despite this short-term resiliency, however, the N.Y. Fed still finds that some subprime borrowers struggle to stay current on their bills, including revolving credit. “With the supportive policies of the pandemic mostly in the past, there are pockets of borrowers who are beginning to show some distress on their debt,” the report said.

Reducing Payments with a Balance Transfer One Option for Consumers

Credit cards typically charge higher interest rates than other loan types when balances aren’t fully paid off, making this an expensive form of debt. One of the best ways to tackle high interest credit card debt is by consolidating it with a balance transfer credit card.

Combining multiple balances onto one balance transfer card (preferably one with a lengthy 0% intro APR offer) makes it simpler to focus energy in one direction while streamlining credit card bills into fewer monthly payments.

Keep in mind, however, that transfers must be completed within a set timeframe (usually between three and six months from account opening) and do not include fees. Balance transfer fees typically range around $5 or 3% of the amount of each transfer, whichever is greater.

Other Options for Different Credit Scores

Another issue with 0% intro APR credit cards is that they are often out of reach for near-prime borrowers. Many issuers require a very good credit score, so a good benchmark for obtaining a balance transfer card with 0% intro APR is a FICO Score of 700 or higher.

Despite these restrictions, balance transfer options are available for fair credit scores. Cards from Upgrade, for example, offer no fees, low rates, cash back, and credit lines up to $20,000 in one unique package.

The Upgrade Visa® Card with Cash Rewards provides the flexibility and predictability consumers need to quickly pay down balances and get debt-free. The Upgrade credit card is one of the lowest regular APR credit cards on the market for those with excellent credit scores – and extremely competitive for those with fair or good credit. Other options from Upgrade include the Upgrade Triple Cash Rewards Visa® (offering 3% back on Home, Auto and Health categories and 1% on everything else) and the Upgrade Visa® Card with Bitcoin Rewards –  the first widely-available BTC credit card in the U.S.

Related Article: Credit Agencies Drop Medical Debt from Credit Reports

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About: Cory Santos
Cory Santos

Cory is the senior credit card editor at BestCards, specializing in everything credit card-related. He’s worked extensively with credit cards and other personal finance topics, including nearly five years at BestCards. Cory’s extensive knowledge is an essential part of the BestCards experience, helping readers to live their best financial lives with up-to-date insights and comprehensive coverage of all facets of the credit card space, including market trends, rewards guides, credit advice, and comprehensive credit card reviews.

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