Paying for the items you use every day has undoubtedly become a struggle in the past couple of years. After all, even though many Americans have received pay increases, inflation has wiped out any meaningful economic gains. Indeed, according to reporting from CNBC, when adjusted for inflation, the average worker’s income has dropped by approximately 2.4%.
Even if you cut back, scrimp and try to save, you may have little choice but to reach for your credit cards to pay for essential items. You also are likely to have to charge any emergency expenses you encounter. You are not alone, of course. Indeed, credit card debt is skyrocketing for most Americans.
$100 billion in new credit card debt
According to Lending Tree, Americans have racked up more than $100 billion in new credit card debt since the second quarter of 2021. This 13% increase represents the single largest annual jump in credit card debt in more than two decades. Eventually, Americans are going to have to pay off this enormous debt or face the economic consequences that come with having too much consumer debt.
A harsh financial future
Credit reporting bureaus are notoriously secretive about the formulas they use to calculate consumer credit scores. Still, all of the bureaus heavily weigh a person’s credit utilization ratio. This ratio compares the amount of credit you are using to the amount you still have available for use.
If your credit utilization ratio is more than about 30%, you may find it extremely difficult to qualify for new lines of credit, a mortgage or an auto loan. Ultimately, rather than trying to keep your head above water, it may be time to think about taking advantage of your debt-relief options.
