With consumers’ finances under pressure due to inflation, a new report highlights additional hurdles to watch out for.

For starters, WalletHub’s Credit Card Debt Study found that consumers racked up $87.3 billion in new debt during 2021. In addition, WalletHub’s Fed Rate Hike Report revealed that a Federal Reserve interest rate increase on March 16 would cost people with credit card debt an extra $1.6 – $3.2 billion in the next year alone, according to a news release.

Below are key findings:

Cities with the Biggest Debt Paydown Cities with the Smallest Debt Paydown
Santa Clarita, CA Bismarck, ND
Burlington, VT Pearl City, HI
Pembroke Pines, FL Augusta, GA
Rancho Cucamonga, CA Casper, WY
Moreno Valley, CA Fargo, ND
Riverside, CA Amarillo, TX
Irvine, CA Lewiston, ME
Bakersfield, CA Corpus Christi, TX
Chula Vista, CA West Valley City, UT
Fort Smith, AR Winston-Salem, NC

Credit Card Debt Study Key Stats

  • Consumers racked up $87.3 billion in credit card debt during 2021.
  • Credit card debt rose by $74.1 billion during Q4 2021 – the biggest increase ever.
  • The average household credit card balance was $8,590 at the end of 2021.
  • The average annual increase in credit card debt over the past 10 years is just $48.5 billion.
  • The best balance transfer credit cards currently offer 0% APRs for the first 12-21 months with no annual fee and low balance transfer fees.

Credit Card Debt Survey Key Findings

  • Return to Pre-Pandemic Spending Habits. Almost half of Americans (47%) say their credit card spending habits went back to pre-pandemic levels in 2022.
  • More Debt to Come in 2022. 33 million Americans will have more credit card debt by the end of 2022.
  • Less Debt Stress for Men. Women are 35% more likely than men to feel stressed about their credit card debt.
  • Personal Finances Managed Better Than Government. 9 in 10 Americans say their finances are managed better than the federal government.
  • Ready to Do Anything. More than a third (37%) of people with credit card debt say they would do anything to be debt-free.

Fed Rate Hike Survey Key Findings

  • War Changing Our Spending Habits. 54% of Americans will reconsider their upcoming spending because of the war in Ukraine.
  • Inflation Concerns. 88% of Americans are concerned about inflation right now.
  • Rates Too High Already. 148 million people think their credit card rates are too high already.
  • Most Say Rate Hikes Are Bad. 55% of consumers think rate hikes are bad for their wallets.

Expert Also Weighed In

Has COVID made it more difficult for people to get into debt?

“Roughly 25% of Americans say that COVID has made it more difficult to get into credit card debt, according to a new WalletHub survey, and a variety of factors have contributed to the situation. Government benefits have fortified many people’s finances. Restrictions and safety concerns have led to more staycations and fewer dinners out. And daily commuting costs have gone to zero for lots of workers,” said Jill Gonzalez, WalletHub analyst. “But even though we saw credit card debt decline early in the pandemic, people have been piling on new debt at increased rates lately. For example, we added $87 billion in new credit card debt during 2021. So, COVID may have made debt harder to rack up for some people, but it’s certainly not impossible to get yourself into deep financial water in this environment.”

What do the latest credit card debt statistics tell us about the health of U.S. consumers?

“Almost half of Americans (47%) say their credit card spending has returned to pre-pandemic levels, a new WalletHub survey found. The latest credit card debt statistics support that, as U.S. consumers added a record $74 billion in new credit card debt during Q4 2021,” Gonzalez said. “Altogether, we added $87 billion in new debt during 2021, and WalletHub projects an increase of more than $100 billion in 2022, according to our estimates.”

How will credit card debt levels look by the end of 2022? 

“Around 33 million Americans say they will have more credit card debt by the end of 2022, according to a new WalletHub survey. This shouldn’t be much of a surprise considering the recent trend in credit card debt levels, nearly half of consumers reporting their spending has returned to pre-pandemic levels, inflation, and the war in Ukraine,” she said. “Just because increased debt levels are to be expected does not mean this is a positive development for the economy, though. Continuing to pile on the debt will put consumers in an even more dangerous position, and we expect an increase of at least $100 billion in credit card debt during 2022.”

Are people worried about interest rate hikes affecting their credit card debt?

“Yes, 51% of Americans are worried about the cost of their credit card debt increasing due to interest rate hikes by the Federal Reserve,” she noted. “People are having trouble making ends meet as-is, and they know rising rates will only increase the cost of their debt. Every 25 basis points the Fed increases its target rate will cost people with credit card debt approximately $1.6 billion annually.”

How is the war in Ukraine affecting consumer sentiment in the U.S.?

“According to a new WalletHub survey, 54% of Americans will reconsider their upcoming spending because of the war in Ukraine. There was a lot of uncertainty about inflation before the conflict began, and that has only intensified since. People are also concerned about the conflict spreading, corporate earnings being affected, and an overall disruption of normal economic activity,” Gonzalez noted.

Are people currently worried about inflation?

“Yes, 88% of Americans are concerned about inflation right now,” she said. “Inflation has been affecting us at the gas station and the supermarket, stretching budgets and diminishing the value of savings. People are not content with the current situation and are worried about it only getting worse.”

What do people think about their credit card rates?

“Approximately 148 million people think their credit card rates are too high already,” she said. “The average APR among credit card accounts accruing finance charges is already over 16%, which is significantly higher than the rates charged for secured debt like mortgages and auto loans. With credit card rates set to rise after the Federal Reserve takes action, people will see the cost of their credit card debt increase.”

How do people feel about Fed rates hikes?

“According to a new WalletHub survey, 55% of consumers think Fed rate hikes are bad for their wallet. We have more debt than savings, after all, and rate hikes make that debt more expensive,” she said.

What are investors’ expectations for interest rates hikes in 2022?

“Markets indicate that rate hikes in March, May, June, and July are more likely than not. In March, for example, there is more than a 90% chance that a quarter-point rate hike will occur. There also appears to be the possibility of 1-2 additional rate hikes later in the year,” Gonzalez said. “But a lot depends on how the economy responds.”

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Source: WalletHub