Jessica Mendoza

The average American carries about $6,500 in credit card debt.

And the number of people with significant debt is going up.

As of last year, about 20% of cardholders had a balance of over $10,000.

Dan, what do we know about what's driving this increase in credit card debt?

But recently, inflation has been growing faster than wages.

And while inflation continues to climb, wage growth is slowing.

When inflation goes up, everyday life becomes more expensive.

Like a sudden expense that's necessary.

For people who mainly use credit cards to earn points or get rewards, this isn't as much of a problem.

But for those who are turning to their credit cards to pay for basic necessities, that debt snowball effect can be devastating.

And it doesn't help that interest rates for credit cards are also rising.

A few years ago, credit card interest rates were lower, hovering around 14%.

That's because during the pandemic, staying home meant there was less to spend money on.

Instead, some people actually used what they had or what they received through stimulus checks to pay down their cards.

As the amount of credit card debt Americans owed decreased, credit card companies started trying to get more people to sign up.

And they did that by offering good deals on credit card interest rates.

And as consumer spending has increased again, credit card interest rates have spiked too.

Those rates are based mainly on two things.

The interest rate set by the Federal Reserve, plus the interest rate that a credit card issuer decides to charge.

The average interest rate for a credit card has climbed to a record high.