According to the New York Federal Reserve, credit card balances increased 15% in 2022 Q3. According to the data, there is now 16.51 trillion (with a “T) of total household debt.
It’s not Just an Increase in Credit Card Debt; It’s a Decrease in Savings as Well.
CNBC articles and Bankrate have published recent articles which state that in 2022, approximately 60% of Americans have less than $1,000 in savings. Further, the average amount of personal savings dropped from $73,100 in 2021 to $62,086 in 2022. So, it’s not just that credit card debt is on the rise, but savings are also dropping.
Fixed vs Variable Rates and Black and White TVs
On the mix of household debt, over 2/3 is in mortgages, which are 90% fixed, and that’s good. However, the 6% of the debt, which is approximately 1 trillion (again, with a “T), is on variable contracts with interest rates anywhere from 18%, which is the average, to a maximum of 26%. That is bad.
The Federal Reserve, in its effort to get inflation down to 2% per year, has increased its key Fed Funds rate at a pace not seen since black and white TVs.
This should be important to consumers with a nagging amount of credit card debt. Those interest rates keep increasing with each Fed Funds rate increase.
What Should You do About it?
If you have too much month left at the end of your money when you just make the minimum payments on your credit cards with interest rates from 18% to 26%, then you should be looking into a way to restructure your debt.
Why are Credit Card Rates Higher than Mortgage Rates?
Interest rates on credit cards are higher because they are not secured. Either taking out a 2nd mortgage or refinancing them into a 1st mortgage are both ways to lower the total interest rate you are paying on your debt because those funds are now secured.
How do you find out?
You just need to call. Contact us today to learn more about the home loan products we offer that are right for you.