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Chapter 1: What is the current state of credit card debt in America?
Melissa Megason lives in South Portland, Maine, where she's worked as a medical assistant for most of her career.
We lived paycheck to paycheck, as many middle-class people do here in Maine, but we were able to manage it.
For a long time, Melissa and her then-husband felt like they had a pretty good handle on their finances.
We would use credit cards if we needed to for emergencies, especially with four dogs come time to go for their annual physicals and shots and all that stuff. That would be the type of stuff we would put on there. We never took vacations. Actually, we shared a vehicle for the longest time.
But then Melissa's life took a turn, and she found herself pulling out her credit cards more and more often. The debt started piling up. At its peak, what was the number that you were looking at in terms of what you owed to credit card companies?
The peak would have been just a little over $20,000 for me.
Melissa makes about $65,000 a year. So her credit card debt was almost a third of her income. And how did you feel or what were you thinking when you saw that amount, when it really sort of dawned on you?
I was shocked because you don't realize it. But then you start thinking about it. A lot of it is... Late fees over limit fees, late fees over limit fees, every month that you don't pay. And so those keep adding up. It's like quicksand. You just keep going lower and lower and lower.
Melissa found herself in a hole, one that more and more Americans are falling into.
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Chapter 2: How did Melissa's financial situation change over time?
Generally, we know that the cost of living has risen, in some cases, markedly, when it comes to household goods, groceries, things that you need. On the flip side, people's wages have gone up as well.
But recently, inflation has been growing faster than wages. And while inflation continues to climb, wage growth is slowing.
Leaving many Americans struggling to stay afloat.
When inflation goes up, everyday life becomes more expensive.
that creates a situation where folks are having to spend more of their income on things that they need, things like food or utility bills or their rent. And so they end up dipping into financial resources that they otherwise didn't have to use. Putting groceries on your credit card where previously maybe you were using your debit card or paying cash for them, right?
That's sort of the baseline level of people's financial experience. But then you throw in something else. like a car repair, right, or a house repair, or something that needs to happen but is going to cost you more than your groceries or your run-of-the-mill shopping trip.
Like a sudden expense that's necessary.
Now you're in real trouble, right, because you've already not paid off these sort of lower-level balances, and now you're being faced with a much higher expense that's going to drive your minimum balance way up.
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.
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Chapter 3: What factors contribute to rising credit card debt among Americans?
Fact-checking this week by Mary Mathis and Kate Gallagher. Thanks for listening. Happy Friday.