More consumers are racking up credit card debt at a pace not seen in decades as interest rates rise and inflation continues to pervade the economy. Many consumers in South Florida are struggling to manage this debt and as a result are in a vicious cycle that they cannot seem to escape.
Total credit card debt was on the rise towards the end of 2022. According to TransUnion, the average credit card user carried a balance of $5,805 over the last three months of 2022. This number is up 11 percent (11%) from 2021.
To keep the economy at bay, the Fed has increased interest rates several times over the past year. The result is borrowers now face higher costs for all consumer expenses, ranging from car loans to credit card debt. Unfortunately, consumer income has not kept up with these rising costs. As a result, more consumers are relying on credit cards to pay for necessary expenses, which only adds to their continual debt cycle.
When the Fed increases their interest rates, credit card interest rates often follow. WalletHub reports that the average credit card interest rate also increased over the last three months of 2022, ending the year with an average rate of 21.6 percent (21.6%), as compared to 18.2 percent (18.2%) from the previous year.
Bankrate reports that the number of credit card users with ongoing credit card loans has also gone up. At the end of 2021, 39 percent (39%) of credit card users carried a balance from month-to-month while 46 percent (46%) reported carrying a balance at the end of 2022.
In December 2022, consumer prices increased by 6.5 percent (6.5%) which is a significant slowdown from when consumer prices were spiking during the summer of 2022. Experts anticipate that inflation will soften over the next few years, eventually bringing prices back to normal levels. To get to that point, however, the Fed may need to increase interest rates again, resulting in increasing credit card rates.
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.