Rising credit card interest rates
are pushing Americans deeper into a long-term debt trap.
Americans now owe $1 trillion in
credit card debt, with an average monthly balance of about $9,600 for borrowers
who don’t pay their cards in full each month.
A year ago, a credit card holder
making only minimum payments shelled out about $1,185 in annual interest, on
average, said Ben Woolsey of CreditCards.com.
After three quarter-point hikes
by the Federal Reserve — a cost that banks pass on almost immediately to card
holders — credit card borrowers are now forking over $1,254, or $69 more a
year, in interest, on average.
Two more rate hikes are on the
table for 2017, which would bring the total to $1,301, or $116 a year in
interest.
One hundred and sixteen dollars —
the cost of a dozen roses on Valentine’s Day, or about 20 Cronuts — may not
sound like much. But when consumers only make minimum payments, credit card
balances balloon. And recent interest rate hikes come as ordinary Americans are
already struggling with surging prices for essentials.
Income gains aren’t large enough
to keep pace. Wages for an ordinary working person — for example, a nurse —
have risen 21 percent in the past decade to about $2,412 a month, according to
Bureau of Labor Statistics data.
By contrast, medical costs rose
57 percent, food prices spiked 36 percent and housing costs jumped 32 percent
since 2003, according to online personal finance Web site NerdWallet.
“It’s not surprising that debt
continues to increase when it’s becoming harder to make ends meet,” noted
NerdWallet’s 2106 Annual Household Debt Survey.
Americans have been eking out
their monthly minimum credit card payments from deep inside the 21st century
debt trap. Defaults remain well below the 6.8 percent high reached during the
Great Recession, but have edged up recently to 2.3 percent.
Personal finance experts
recommend borrowers with a hefty balance shop around for zero-percent-interest
balance transfer offers. Look for fees of 3 percent or less, and terms of 18
months or more.
Check out credit unions as well
as banks, which often require higher credit scores.
Click
here for the original article from the New
York Post.