- Kobeissi Letter revealed that US credit card interest rates surged to a record high of 23.4% in August.
- Data showed that more people than ever are working multiple jobs, hitting an all-time high of 8.6M in September.
- Credit card interest rates remain high despite the Fed cutting interest rates by 50 basis points in September.
US credit card interest rates have increased dramatically in the past four years, now at 23.4%. The total credit card debt also broke records by exceeding the trillion-dollar mark.
Read on to discover the contributing factors and what this means.
US Card Debt Now a Record $1.36T
Credit card debt in the US became impossible to ignore after interest rates hit an all-time high of 23.4%. Even though banking interest rates have come down, banks have systematically increased rates for credit card holders.
Specifically, the credit debt crisis is associated with the excessive interest rates lenders charge. Many credit card owners are paying more for essentials by using their credit cards. The trend shows an over-reliance on card debt for daily expenses, negatively impacting their overall financial health as they accumulate debt.
Kobeissi Letter stated that credit card debt now stands at $1.36T. The interest that debtors pay on this amount comes to $318B. The Consumer Financial Protection Bureau also estimates that debtors pay nearly $14B annually in late fees.
Interest Rates Have Risen Despite Fed Cut Rates
The recent interest rate cut by 50 basis points has caused a declining ripple effect on home equity loans and mortgages. Yet, credit card loans remain high as credit card issuers have consistently been increasing their rates.
Several factors contribute to the still-high credit card interest rates, including economic uncertainty, market competition, and a lag time in adjusting interest rates. Kobeissi Letter also reported that in the US, 8.6M people are working multiple jobs to afford necessities, reaching a new record.
The Bottom Line
The higher the credit card interest rate, the more expensive it is for people to borrow. People increasingly rely on their credit cards to pay for essentials, while inflation has increased the overall cost of living.
With the rising interest rates, people find it more difficult to pay off their debts.
And the vicious cycle continues.
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