NORFOLK, Va. — Across the country, people's finances are being stretched thin, forcing them to put more charges on credit cards.
For the first time in history, the total credit card debt in the United States has hit $1 trillion.
So, before you swipe your credit card, consider if the purchase is worth it - and then consider if it’s worth paying more than the price tag.
“As the interest rates get higher and higher, it becomes harder and harder to pay down that debt,” says Thomas Nitzsche, a financial educator at Money Management International.
A new report by LendingTree says the average credit card interest rate is 24.45%, which is enticing more people to get financial help.
“So far this year, we're seeing about 45% more in counseling volume versus the same time frame last year,” says Nitzsche.
Money Management International is a nonprofit that gives customers free credit counseling and financial education.
Nitzsche says before a person typically reaches out, they have about $26,000 of debt.
“I think between medical, and just the general cost of living [increase], is the reason we're seeing more people turn towards credit cards, and then it becomes harder to pay them down as those balances get higher and higher, and the interest rate gets higher and higher,” he says.
He says MMI credit counselors often help clients go from near 30% interest to single digits. It’s important to note that there are several different avenues to take, depending on your financial situation.
The conversation is also sparking debate in Congress as a senator from Missouri introduced legislation to cap credit card interest rates at 18%.
Nitzsche explains both sides of the argument: "If they were to reduce the average interest rate from, you know, from 22%, to an 18%, that's obviously great for people who are carrying a balance now and who already have an account. But the concern would be that it would squeeze folks on the lower end of the credit spectrum out of having a card at all."
As for actionable solutions, MMI says:
- Understand your budget and see where you can cut back
- Ask your lender for a lower rate
- Consider consolidating credit debt by using a personal loan. You may save on interest rates and boost your credit score
- Reach out to credit counselors for advice
If you have a consumer tip or are in over your head with debt, reach out to the News 3 Problem Solvers at problemsolvers@wtkr.com.
