The average credit card interest rate has now reached 28.9%, the highest rate on record, according to a new survey published by the site Bankrate.com. Anything nearing the 29% rate has long been regarded as an “artificial barrier that few dared to cross” in the industry, remarked Ted Rossman, a senior industry analyst for Bankrate. “But the market has blown past that threshold given the Fed’s aggressive series of interest rate hikes over the past year and a half,” continued Rossman. Today’s rate is extraordinary compared with where things stood in 2008 when the country was just entering the Great Recession. Then the rate was at 18.1%. In the next decade, the rate slowly climbed to 25.6%, and entered a historic high last year when it came in at 26.7%. The latest rate, notes the Washington Examiner, “can be seen as a warning for shoppers heading into the holiday shopping season.” In fact, adds the publication, the annual percentage rate is now “making shopping and paying off retail debt far more challenging, particularly considering that consumers are already being hurt by high inflation.” Overall credit card debt in the U.S. surpassed the $1 trillion market in August, with outstanding balances on cards increasing by 18.1%. At the same time, notes the Atlanta-based financial data company Equifax, sixty-day payment lateness has increased to 1.8%, up from 1.2% last year. According to the Consumer Financial Protection Bureau, Americans were burdened with $105 billion in credit card interest in 2022. Of that amount, the last four months of 2022 accounted for $30.5 billion—the highest such quarter rate in nearly a decade. The high debt rate currently assumed by consumers also makes them more vulnerable to scams, notes Rohit Chopra, CFPB Director. “With credit card debt crossing the trillion-dollar mark, we will be working to prevent bait-and-switch tactics when it comes to rewards and to increase refinancing activity so consumers can get lower rates,” said Chopra in a statement. The CFPB also notes the increased presence of a credit card conundrum: nearly 10% of credit card users today find themselves in persistent debt, being charged “more in interest and fees each year than they pay toward the principal—a pattern that could become increasingly difficult for some consumers to escape.” Responses in Washington to the historic credit card rate have seen Missouri Senator Josh Hawley introducing the Capping Credit Cards Interest Rates Act, which would mandate an annual percentage rate of no more than 18%. That measure is currently under review in the Senate Committee on Banking, Housing and Urban Affairs. Credit cards first came into wide use in America with the introduction of the Diners Club in 1949 and both the Carte Blanche and American Express cards, introduced in 1958. Used by well under 10% of consumers during the Eisenhower years, today 84% of Americans own and use at least one credit card. By Garry Boulard
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