Americans Paid $113 Billion in Credit Card Interest
Apr 3rd, 2019 @ 8:53 PM by Amber Nelson
Americans are now paying almost double the amount of credit card interest as they did just five years ago. According to a study from MagnifyMoney, U.S. borrowers’ credit card interest totaled $113 billion in 2018, a 12% increase from the year before. It is predicted that consumers will pay as much as $122 billion in interest this year.
The skyrocketing increase in credit card interest can be traced to several factors. For one, the overall economy is doing well, leading consumers to feel more confident in their financial position and ability to borrow money. This has resulted in $1.034 trillion in credit card debt, the highest total since before the financial crisis. That number is likely to just keep rising as Americans have the highest positive outlook on current economic conditions than at any time since 2002, according to data from the Pew Research Center.
Additionally, the Federal Reserve raised its target interest rate four times in 2018. That has caused lenders in turn to push up the rates they charge their customers. However, due to slowing economic growth, the Fed has revised its forecast for 2019 rates, saying they do not expect to raise interest rates anymore this year. Even still, the Fed reports that the average credit card APR has jumped to 16.86%, an almost 4% increase over the last five years.
Fortunately, consumers seem to be managing their credit card debt well as delinquency rates have leveled off and remain near historic lows. Credit card accounts in delinquency made up just 2.54% of all loans as of the 2018 fourth quarter.
And yet, the Federal Reserve has found that 40% of all active credit card borrowers do not pay off their balances in full each month. That type of consumer behavior can cause interest charges to add up and put a strain on the borrower’s financial resources.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.