PHOENIX — More Americans are carrying credit card debt over month-to-month, rather than paying off a card in full, according to a recent survey from Bankrate.
The survey shows that over 35% of U.S. adults are carrying credit card debt month to month, up from 29% last year.
“We have more people carrying more debt that is more expensive,” said Ted Rossman, a senior industry analyst at Bankrate.
The average credit card interest rate is just over 19%, the highest ever recorded by Bankrate, Rossman said. In addition to rising interest rates, the New York Fed reports credit card balances are up 15% year-over-year, the largest increase in more than 20 years, with the average American now carrying more than $5,000 worth of credit card debt, according to a survey from TransUnion.
“When you put it all together, it’s definitely a tough combination,” Rossman said.
Rossman pointed to two factors contributing to rising credit card debt.
The primary cause, he said, is typically an emergency expense, such as a medical emergency or unexpected car or home repair.
“Second is day-to-day living,” Rossman said. “And I think that's been especially relevant this past year, with inflation being so high. Interest rates have gone higher. A lot of people are putting essentials on their credit card, whether that’s groceries or gas or other day-to-day items.”
With costs and credit card debt rising, ABC News Business Reporter Alexis Christoforous offered a few tips to financially reset.
The number one bad money habit to break, according to Christoforous, is to stop making just the minimum payment on credit cards each month.
“We're expecting those interest rates to move even higher for credit cards as the Federal Reserve continues to raise interest rates to combat higher inflation,” Christoforous said. “The best-case scenario is you're able to pay off that monthly credit card bill in full every month. If you can't, make sure you're making more than just the minimum payment on that credit card.”
Christoforous also recommended consolidating credit cards with larger debts onto an interest-free credit card. But it’s important to understand the terms of those interest-free cards.
“You want to make sure that you understand the terms because there are times when if you don't pay that off in full by a certain amount of time, you're going to get hit with even higher interest rates,” Christoforous said.
Transfer fees range from 3 to 5 %. If a debt transfer is possible, Rossman said discipline is key for repayment.
“Don't muddy the waters by adding more purchases,” Rossman said. “Really just try to stick to a level payment plan. And then you can be among those who pay it off without that interest hitting.”
One way to take advantage of rising interest rates, according to Christoforous, is to look for high-yield savings accounts.
“Don't leave more money than you need to in your checking account,” Christoforous said. “Of course, you need to put enough money in there to cover your monthly expenses and have a little cushion on top of that. But money sitting in a checking account does not make any interest.”
Move that extra money from a checking account to a high-yield savings account, Christoforous said.
“Oftentimes, it's the smaller banks or online banks that will give you a more competitive interest rate,” she said.
Christoforous noted that it appears interest rates will continue to rise in the first half of the year as the Federal Reserve continues to raise interest rates to combat high inflation.
“So, take advantage of that and have your money work for you for a change,” she said.