Millions Of Households Are Behind On Their Credit Card Bills. Here's How To Get Back On Track

A Note From Patricia:

Hello and welcome to Forbes Advisor’s Weekly Brief, where each week we dive into the realities of consumer finance and empower you with knowledge to help make your financial journey easier.

After historic lows during the pandemic, credit card delinquency is rising.  

The Federal Reserve Bank of New York’s quarterly report on household debt and credit found that nearly a fifth of Americans “maxed out” their credit cards—meaning they’d used 90% or more of their available credit. Carrying this level of debt can tank your credit scores and result in high interest charges. 

Joelle Scally, an economist at the New York Fed, said in a press release that the missed credit card payments reveal “worsening financial distress among some households.” 

In this week’s weekly brief, we’ll discuss why credit card delinquency is on the rise and how you can get back on track with repaying your debt.

Sincerely, 

Patricia Louis

Editor, Forbes Advisor

Millions Of Households Are Behind On Their Credit Card Bills. Here's How To Get Back On Track

Inflation has pushed some Americans to become more reliant on their credit cards, since their take-home pay doesn’t go as far. 

But as inflation continues to grip the economy, the Fed’s rate increases have taken a toll on interest rates across the board, including credit cards. According to Ned Davis Research, a global provider of independent investment research, solutions and tools, “higher interest rates have definitively made their mark on consumer loans and credit card debt. Indeed, delinquency rates have jumped in line with higher interest rates.” 

The share of credit card debt that's over 90 days past due rose to 10.7% during the first quarter, 13.1% above last year’s levels. Delinquencies are now at a 14-year high.

If you pay the minimum on your credit card balances, these balances may snowball over time and become harder to manage. If you’re affected by debt, you can do a few things to start eliminating your debt:

• The debt avalanche method: With this method, you focus on eliminating your credit card debts from the highest interest rate to the lowest. Start by contributing the most money to the card with the highest interest rate and pay at least the minimum to your other cards to keep them in good standing. Then, once each card is paid off, repeat the process, creating an “avalanche” of debt elimination that builds momentum as you pay your cards off. 

• Call your credit card company: Most major credit card companies offer hardship programs. By picking up the phone and letting them know you’re struggling to pay back your debts, you may be eligible for a payment plan or lower interest rate for a set period of time. However, you’ll have to stop using your credit cards completely to avoid falling into another debt trap. 

• Debt consolidation loans: You can combine your credit card balances into one single payment and potentially reduce your monthly payment or interest rate with a debt consolidation loan. Keep in mind that you’ll need to avoid future overspending if you choose this method, and make sure the fees associated don’t offset the interest you would save with the lower rate. 

Related Stories: 

• Best Ways To Get Out Of Credit Card Debt In 2024
• Average Credit Card Debt Study 2024
• Credit Card Payoff Strategies: What Does The Research Say?

Here’s what else is going on in the news this week:

• 160,000 Borrowers Receive $7.7 Billion in Latest Student Loan Forgiveness Round The Biden Administration has announced yet another round of student loan forgiveness, this time canceling $7.7 billion in debt for 160,000 borrowers. Here’s who qualifies.
• Lawsuit Accuses SoLo Funds Of Hiding Loans’ True Cost Federal regulators are suing a fintech platform, accusing it of illegally collecting millions of dollars in fees—in the form of tips and donations—from consumers.