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Why you should pay off your credit card debt now

On Behalf of | Mar 27, 2024 | bankruptcy |

Rising inflation and interest rate hikes have left millions of consumers in Maryland and throughout the country struggling to make ends meet. A report released by the Federal Reserve Bank of New York reveals that the amount of revolving debt being carried by American consumers has risen to $1.13 trillion. Credit card debt increased by a worrying $212 billion in the fourth quarter of 2023 alone.

High rates and delinquencies

Paying off that debt will be difficult for Americans because the average credit card interest rate is now about 21.5%. That is the highest average credit card APR since the reserve bank started tracking consumer interest rates in 1994. Credit card delinquency rates are also rising according to the Federal Reserve Bank of New York report. By the end of 2023, about 6.4% of the credit card debt in the United States was 90 or more days delinquent.

Financial stress

Most experts believe rising credit card balances and soaring delinquency rates are signs that many Americans are under a great deal of financial stress. Credit card debt increases when people use their cards to pay for necessities like utilities and food, and delinquency rates rise when consumers do not have enough money to make their monthly payments. When financial situations become unmanageable and harassment from debt collectors becomes a part of daily life, consumers seeking a fresh start often file for bankruptcy.

A fresh start

Credit cards offer consumers a convenient way to finance major purchases, but revolving debt interest rates are higher than traditional loan APRs. When credit cards are used to pay for everyday necessities, consumers can find themselves trapped in a revolving debt spiral. To escape from this debt trap, consumers can seek debt relief by filing Chapter 7 or Chapter 13 personal bankruptcies. Seeking debt relief offers the possibility of a fresh start, and it puts an immediate end to creditor harassment.



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