Economists expect the Federal Reserve to begin cutting interest rates next month, but until then, borrowing money will remain very expensive, especially for people with credit card debt.
Ali and Josh Lupo graduated from college with large student loans. Earlier this year, the couple resorted to credit cards to make ends meet, racking up $10,000 in debt.
“We weren’t even really living a lavish lifestyle,” Ali said. “Credit cards seemed like a way to have a little more flexibility.”
A new report from the Federal Reserve Bank of New York shows that credit card balances in the U.S. hit a new record, reaching more than $1.1 trillion in the second quarter, up 45 percent from 2021. Another survey from Bankrate shows that 50 percent of all credit card holders are carrying debt from month to month, up from 44 percent in January. The average balance is $6,200, and the average interest rate is near a record high of nearly 21 percent.
“If you make minimum payments on the average balance, which is about $6,200 according to TransUnion, those minimum payments will keep you in debt for 18 years,” said Ted Rossman of Bankrate.com.
Rossman suggests working with nonprofit credit counselors to consolidate debt is one way to manage finances. Another option is to transfer your current balance to a new card with a zero percent introductory interest rate and pay off as much as you can before the higher interest rate kicks in. The Lupos followed this strategy and developed a budget plan.
“We had never really calculated how much we owed and how much that debt was affecting our lives,” Josh Lupo said.
They also worked part-time jobs to earn more money. Today, the couple is debt-free.
