Credit card interest rates are anticipated to increase after the Federal Reserve increased its benchmark interest rate an additional three-quarters of a point. For consumers who rely on credit cards to keep up with the increasing costs of gas, groceries, and other necessary expenses, this news does not come at a good time.
Currently, the average variable credit card interest rate is at 18.6 percent, which is the highest rate seen in 27 years. Unfortunately, this rate is only expected to go up from here.
This extra interest is not just being charged against new debt either. According to a new report issued by CreditCards.com, 60 percent (60%) of all credit card holders say that they have owed their debt for at least a year. This figure is up from 50 percent reported in 2021.
Additionally, 40 percent (40%) of the 2,419 consumers surveyed said they have been carrying their credit card debt from month to month for at least two years, which is up 32 percent (32%) from last year. Twenty-eight percent (28%) of those surveyed said they have carried an outstanding balance for at least three years. On top of that, 19 percent (19%) said they have carried a balance for at least five years, and eight percent (8%) reported that they have had balances for so long that they did not know how long they have carried a credit card balance.
Credit card debt is most common for cardholders who have annual household income under $50,000. Just under half of middle-income households, specifically those earning between $50,000 and $79,999 annually, reported carrying credit card debt from month to month. Of those making $80,000 to $99,999 annually, 46 percent reported having credit card debt from month to month. What this means is more consumers than not are not paying their credit card bills off in full every month.
The higher the interest rates are on these cards and the higher the balances get, the more difficult it can be for consumers to ever pay these balances down, which is why financial experts recommend consumers put all their focus on paying off their credit card balances first before any other type of debt. If their balances are getting out of control, it may be time to transfer the balances through a balance transfer card with a zero percent promotional interest rate, so long as the consumer is able to pay the balance off before the promotional period expires. Personal loans can also be another way to consolidate debt and pay off outstanding credit card bills with high interest rates. The key is to eliminate debt that carries a high interest rate as soon as possible for the consumer.
As bankruptcy attorneys, we see credit card debt as one of the most common problems facing those with serious financial challenges. It is not surprising with the high interest rates, unreasonable fees, harassing debt collection calls, penalties and never-ending minimum payments that do not even make a dent in your actual debt.
Filing for bankruptcy is a viable option for those struggling with insurmountable credit card debt. Chapter 7 is the fastest form of consumer bankruptcy and forgives most unsecured debts like credit card debt, medical bills, and personal loans. There are certain qualifications a consumer must meet in regard to income, assets and expenses to file for Chapter 7 bankruptcy, which is determined by the bankruptcy means test.
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If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.