MINNEAPOLIS — Americans are back to their old spending ways.
A new study from WalletHub used data from TransUnion, the Federal Reserve and the Bureau of Labor Statistics to see how much credit card debt Americans added in 2022.
According to the study, Americans added $180.3 billion in new credit card debt last year, a new record.
That’s quite a bit higher than the 12-year average of around $48 billion.
WalletHub estimates the average American household has around $9,990 worth of credit card debt.
Just two years ago during the height of the pandemic Americans shaved off $82.1 billion worth of credit card in 2020, which is also a record in terms of Americans paying off credit card debt.
However, in 2021 Americans went back to their pre-pandemic spending habits by adding $86.8 billion in debt, which is relatively high compared to most years, but is still less than half the amount of debt that Americans accumulated in 2022.
According to the study, Minneapolis residents on average had $10,325 in credit card debt in 2022, which is $1,404 higher compared to 2021.
Saint Paul residents fared slightly better with an average of $10,286 in credit card debt in 2022, an increase of $1,308 compared to 2021.
"It is overwhelming for a lot of households,” Karyn Rando says.
Rando is the Director of Counseling Operations at Consumer Credit Counseling Service.
She and her colleagues work with clients who are struggling with debt.
“We’re seeing an uptick in our appointment volume,” Rando says.
And credit card debt is a big reason why they’re seeing more clients coming in for advice.
"It's a snowball effect, especially if you have multiple credit cards,” Rando explains.
The ‘snowball effect’ of credit card debt can lead to big problems under normal circumstances, but Rando says the current economic environment is making the situation even worse for some families.
First, there’s high inflation, so people are paying higher prices.
Those higher prices are leading to higher amounts of credit card debt.
That credit card debt is also becoming more expensive due to the Federal Reserve raising interest rates.
Rando says the federal government is expected to raise interest rates later this month.
“It's just going to add additional stress on households in the coming months,” Rando says.
The WalletHub study estimates that the March interest rate hike alone could add $3.4 billion dollars in new credit card debt over the next 12 months.
And so, the ‘snowball effect’ continues.
"It can create a debt spiral that is difficult to get out of,” Shannon Doyle says.
Doyle is the Program Manager of Partnerships and Financial Education at Lutheran Social Services.
She says the situation could get even worse in the coming months
"You know, we don't have student loans in repayment back yet, but that's coming up too. I fear that when those payments go back into place too, that may end up putting an even larger strain on people's budgets.”
Doyle is encouraging people with student loans, who haven’t made payments over the last two years, to start making a plan now.
And for anyone who's struggling with credit card debt, she says take a deep look at your budget, and while you're working things out, stop using your credit card so the debt doesn't compound and get even worse.
“The only way to stop that cycle of paying with a credit card, running out of cash, and then adding to the credit card again, is to stop using the card,” Doyle says.
“And then you just focus on paying that very minimum payment until things are more stable.”
But Doyle says some financial situations are so out of hand they can’t be fixed without professional help.
She says anyone who is worried about their financial situation can reach out to a counseling service to get some advice.
The Minnesota Department of Commerce sent KARE-11 this list of all of the companies in Minnesota that are licensed to help with debt.
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