Editorial

Digging deeper into debt

Posted 9/15/22

One sure sign of emergence from the pandemic is that consumer spending is on the increase. We are spending more of our hard-earned dollars, not just on fun things, like travel and entertainment - …

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Editorial

Digging deeper into debt

Posted

One sure sign of emergence from the pandemic is that consumer spending is on the increase. We are spending more of our hard-earned dollars, not just on fun things, like travel and entertainment - something we didn’t get to do too much of in the past two years - but on essentials, like gas and groceries, which have increased in price.

How do we know that spending is up? We are deeper in debt. WalletHub, a financial services company, reports of credit card spending reaching into the billions. In fact, the company reports, U.S. consumers are once again adding new credit card debt by the billion, racking up $67.1 billion during Q2 2022. That is an all-time record for credit card debt added during the second quarter of a year, and WalletHub now projects that consumers will add a total of $110 billion in debt during 2022.

This new debt is also likely to become even more expensive soon, with the Federal Reserve expected to raise its target rate by 75 basis points on September 21. WalletHub anticipates this will cost people with credit card debt an extra $5.3 billion over the next 12 months. That’s on top of the $15.3 billion increase already caused by the Fed’s previous rate hikes this year.

Not surprisingly, New York is near the top of the list. New York is currently ranked fourth in credit card debt, behind California, Texas and Florida. The average household in New York owes $8,214 in credit card debt, following a $561 Q2 increase.

It’s a sobering message that has many people concerned. The same report estimates that 85% of Americans are concerned about inflation right now and that 44% of people do not think they are financially prepared for a recession.

We cannot, of course, control the prices of gas or food, but we can all find ways to control our spending. There are no easy ways to do that, but most of us have been down this road before.