Given that consumer spending comprises more than two-thirds<\/a> of America\u2019s GDP, indications of consumer distress can be a red flag for the economic health of the country.<\/p>\n<\/blockquote>\n\n\n\n https:\/\/www.theepochtimes.com\/us\/increasing-numbers-of-americans-getting-trapped-in-credit-card-debt-5742995?utm_source=partner&utm_campaign=TheLibertyDaily<\/a><\/p>\n\n\n By Kevin Stocklin<\/p>\n\n\n\n Rising prices and higher interest rates are trapping many Americans in expensive credit card debt, a new report states. <\/p>\n\n\n\n According to a survey<\/a> released Thursday by Bankrate, a financial analytics firm, 37 percent of American credit card holders have maxed out or nearly maxed out on their card limits since the Federal Reserve began raising interest rates in March 2022. <\/p>\n\n\n\n \u201cThat\u2019s probably higher than you would expect to see in an economy that has low and stable inflation,\u201d Bankrate analyst Sarah Foster told The Epoch Times.<\/p>\n\n\n\n \u201cI think this is just a sign that consumers are feeling some distress, and the nationwide aggregate numbers just might be masking what\u2019s underneath the hood.\u201d<\/p>\n\n\n\n According to the survey, more than half of the respondents who had gone deep into credit card debt blamed inflation, which has reduced the value of the U.S. dollar by more than 20 percent since 2021 and left many Americans struggling to afford basic necessities. The second reason, cited by 38 percent of respondents, was unexpected emergency expenses.<\/p>\n\n\n\n Aggregate U.S. labor data<\/a> are generally positive. Unemployment, while edging up slightly over the past year, remains low at 4.1 percent as of September, according to the Bureau of Labor Statistics. Wage growth, while down from 2023, is 4.7 percent as of September, according to Fed statistics.<\/p>\n\n\n\n But national averages don\u2019t always capture the plight of those who are struggling. <\/p>\n\n\n\n According to the Q4 2023 Quarterly Credit Industry Insights Report (CIIR) released<\/a> in February by TransUnion, a credit-rating company, Americans\u2019 credit card debt exceeded $1 trillion for the first time on record, and grew by 13 percent over the prior growth year.<\/p>\n\n\n\n And by contrast to more affluent Americans, who can draw on options like home equity for cash, those who must resort to credit cards will typically pay interest rates<\/a> of almost 25 percent, according the LendingTree, a consumer finance company. Those high interest rates add to monthly card payments, making it even more difficult for those who have gone deeply into debt to climb back out of it.<\/p>\n\n\n\n In addition, those who max out on their credit cards also often see their credit scores decline, closing off other options to consolidate their debt at lower rates. <\/p>\n\n\n\n According to Experian, a credit-rating company, a person\u2019s credit-utilization ratio<\/a>, or how much an individual has borrowed under available credit lines, comprises about 30 percent of a FICO credit score, a key measure used by banks and card companies to assess creditworthiness. Running up against card limits will often result in a substantial reduction of a person\u2019s FICO score.<\/p>\n\n\n\n Lower FICO scores not only result in higher interest rates, they can also drive up other costs, like car insurance. People with poor credit pay on average $4,349 per year for a full coverage car insurance policy, compared to $2,348 for those with a good credit rating, Bankrate insurance analyst Shannon Martin told The Epoch Times. By comparison, a driver with a drunken driving arrest pays $4,557.<\/p>\n\n\n\n Given that consumer spending comprises more than two-thirds<\/a> of America\u2019s GDP, indications of consumer distress can be a red flag for the economic health of the country.<\/p>\n\n\n\n \u201cFrom the economic standpoint, if we already have this many Americans struggling to handle inflation\u2014they\u2019re tapping their credit cards and running out of options to finance essential expenses\u2014that\u2019s a pretty worrisome sign for the economy too,\u201d Foster said. \u201cWe\u2019re in the fourth quarter now and we\u2019re approaching a crucial holiday shopping season.\u201d<\/p>\n\n\n\n Typically, she said, when people max out on their credit cards it also indicates they are likely behind on paying other bills, such as heat, water, and electricity. <\/p>\n\n\n\n An October report<\/a> from BankruptcyWatch found that personal bankruptcy filings have increased significantly over the past three years.<\/p>\n\n\n\n \u201cChapter 7 filings\u2014a lifeline for many struggling households\u2014increased by 44.77 percent year over year,\u201d the report stated, also noting an \u201cunprecedented surge in Chapter 13 filings,\u201d which are filed by individuals who hope to hold on to essential assets like their homes and cars, and which increased more than 21 percent year over year.<\/p>\n\n\n\n While personal bankruptcy filings are trending upward, they are still well below pre-pandemic levels, and BankruptcyWatch calls a relatively healthy employment market a \u201csilver lining\u201d for Americans.<\/p>\n\n\n\n However, current trends in bankruptcy filings suggest a return to pre-pandemic levels, the report states. <\/p>\n\n\n\n Analysts say that some of the recent increase in bankruptcies is due to the fact that government payments following COVID-19 lockdowns have run out for many Americans.<\/p>\n\n\n\n Noting that \u201cpandemic relief efforts have largely expired,\u201d American Bankruptcy Institute executive director Amy Quackenboss stated <\/a>in March 2023 that \u201cdebt loads are expanding as the prices of goods and services have gone up with inflation and the cost of borrowing continues to rise.\u201d<\/p>\n\n\n\n\u2018This is just a sign that consumers are feeling some distress,\u2019 Bankrate analyst Sarah Foster said.<\/h5>\n\n\n\n
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Concerns About Consumer Spending<\/h2>\n\n\n\n