Americans are facing unprecedented levels of credit card debt, reaching a staggering $1.17 trillion in 2024. This financial strain is evidenced by the average debt per borrower climbing to $6,380 in the third quarter of 2024, according to TransUnion. With an average interest rate of 20.13%, many borrowers find themselves struggling to manage these escalating balances. In a striking example, Robert F. Kennedy, Jr. has disclosed credit card debts ranging from $610,000 to $1.2 million, highlighting the broader issue of high credit card debt among affluent individuals.
Kennedy's financial disclosures reveal that his credit card accounts carry interest rates between 23.24% and 23.49%. If he pays $50,000 monthly towards a $610,000 balance, he could clear his debt in approximately 15 months. However, if he owes $1.2 million, it would take him 33 months to repay the amount, incurring roughly $434,000 in interest charges. This situation underscores the financial burden faced by many Americans.
"That's a truly massive amount of credit card debt." – Ted Rossman, senior industry analyst at Bankrate.
The situation is exacerbated by rising unsecured debt, which climbed 8% to reach $29,364 in 2024, as reported by Money Management International. Additionally, 24% of credit card borrowers have remained in debt for at least five years. This increase is attributed partly to inflation, which has significantly reduced financial flexibility for many.
"With inflation being so powerful and so stubborn, it's just shrunken a lot of people's financial wiggle room down to zero." – Matt Schulz, chief credit analyst at LendingTree.
A substantial portion of high-income earners also grapple with long-term credit card debt. A striking 59% of borrowers earning $100,000 or more have been in debt for over a year. This is often due to higher credit limits afforded to wealthier individuals, which can lead them into financial difficulties.
"Higher-income people often get higher credit limits, and sometimes that gets people into trouble." – Ted Rossman, senior industry analyst at Bankrate.
Despite their financial status, experts advise against relying on credit cards for borrowing. Charlie Douglas, a certified financial planner, emphasizes that credit cards are typically not the most effective borrowing method for the wealthy. Instead, financial advisors recommend consumers avoid ongoing credit card debt due to its high-interest rates.
"If you're paying down credit card debt at 20%, that's a guaranteed risk-free, tax-free return." – Ted Rossman, senior industry analyst at Bankrate.
The American Express Centurion Card, commonly known as the Black Card, epitomizes the high cost associated with certain credit cards. It charges a $10,000 one-time fee and an annual fee of $5,000. While such cards offer exclusive perks, they can contribute to financial strain if not managed properly.
Experts stress the importance of tackling high-interest credit card debt promptly. They recommend strategies such as budgeting effectively and prioritizing debt repayment to mitigate financial burdens. By doing so, consumers can achieve a risk-free and tax-free return on their finances.
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