(NewsNation) – Americans are racking up a mountain of credit card debt this year: Total second quarter balance stands at $887 billion, up 13% from first quarter, according to Lending Tree.
The news is a byproduct of the Federal Reserve raising interest rates four times this year, which, coupled with record inflation, is pushing more people into deeper debt.
The Fed’s approach to inflation has affected the financial health of millions of Americans, many of whom use credit to pay for basic necessities such as groceries and gas.
Commuting between home and work, buying only the necessities, and budgeting are just a few of the practices consumers are listing as they try to navigate new financial challenges.
It’s a pinch particularly felt among credit card users: according to Lending Tree, the the average consumer has over $6,500 in credit card debt.
“It’s not the worst it’s ever been, but it’s on the way,” Matt Schulz, chief credit analyst at Lending Tree, told NewsNation’s “Rush Hour” on Tuesday.
Schulz also said the current conditions are unprecedented.
“The average rate on a new credit card offer today is just over 21%. It has never been so high and what is really unfortunate is that it will only increase,” he said.
High inflation causes about two-thirds of consumers to cut back on discretionary spending, such as buying new electronics or clothes. Rising debt could soon impact many credit scores, reducing who can qualify for new homes or cars.
The vicious cycle of credit card debt is hard to break.
“I don’t want to go back in this hole because we were paying about a thousand dollars a month in interest,” Cody Rice-Velasquez, a credit card user, told “Rush Hour” on Tuesday.
“The best way to break the cycle of credit card debt is to have a little extra savings on hand so you don’t have to pull out the credit card the next time you have a flat tire or you have to take the dog to the vet,” Shultz said.
And while many consumers intentionally use their credit cards to rack up miles and points, analysts say great care needs to be taken because rising rates mean balances will swell much faster.