American household budgets are facing a lethal combo: exploding debt and historically high interest rates. Total credit card debt in the U.S. has reached a record high, with the average credit card balance now at $6,140, according to Bankrate's state-by-state debt report. In Texas, the average credit card balance is even higher, at $6,620.
All of this adds up to an ugly picture for Americans' debt situation. "Americans' total credit card balances are up 47% from the beginning of 2021, and the average interest rate is 20.75%," says Ted Rossman, senior analyst at Bankrate. "It's never been higher, according to our database that goes back to the mid 80s."
Rossman tells KTRH this debt burden will snowball out of control unless we take responsibility and get a handle on it. "If you have the average credit card balance with the average interest rate, and you make minimum payments only, you're going to be in debt for about 18 years and will pay more than $10,000 just in interest," he says.
To that end, he recommends throwing as much extra money as you can at your credit card debt. "Maybe that means getting a side hustle, or selling stuff that you don't need, or cutting your expenses," says Rossman. "Or get a zero percent balance transfer card...these allow you to pause the interest clock for up to two years while you tackle the debt."
The good news is that for most people, this debt is not insurmountable. "There was one uplifting finding here in our study," says Rossman. "If you put five percent of the average monthly household income toward the average credit card balance, in every single state you can be debt free within two years, if you do that."
"And that sure beats minimum payments, which can drag on for close to two decades."
Photo: Moment RF