Inflation leads to record credit card use

Despite falling gas prices, inflation is still a problem many families face, and a new report from TransUnion shows it’s forcing more families to rely on lines of credit.

TransUnion reports that the number of people with credit cards and personal loans reached record highs in the second quarter of 2022, with the total number of credit cards surpassing 500 million for the first time ever, and balances on those cards jumped 13% over the same period. period, the largest year-over-year increase in more than 20 years.

“A lot of people rely on their lines of credit as a safety net, a financial safety net, to help cover some of the cost of living,” said Bruce McClary, senior vice president of communications and memberships at the National Foundation. for Credit. Tips.

The increase in credit card use is a significant shift from pandemic-induced trends. In 2020, the Fed announced that credit debt in the United States had fallen by $120 billion, the largest drop on record, and then by another $28 billion in the first four months of 2021.

“The NFCC conducted a survey and released these results earlier this year which showed that about 2 in 5 Americans have month-to-month credit card debt and less than 1 in 3 even have a plan, plan basic, on how to pay off the debt they owe,” said McClary, who warns of further interest rate hikes.

“If you’re in a position where you’re not paying off your credit card debt in your billing cycle and you’re carrying debt month to month, you should be worried about those Fed rate increases because that’s going to increase the cost of paying off debt you already owe.

The TransUnion report also shows that the number of people defaulting on their debts is growing faster among those with below-average credit scores. McClary says that should prompt many of us to look at our budgets to see where we can cut money so reimbursement doesn’t spiral out of control.

“It’s important to develop a plan for the worst-case scenario. And recessions always end up affecting the job market and that could mean layoffs,” he said.

Prioritizing debt repayment can be difficult with higher property costs, but McClary says the more you can spend on it monthly, even if it’s not as much as you want, will save you money on long-term interest rate costs. .