Americans are choosing credit cards to cope with high inflation
Americans are increasingly turning to credit cards to cope with high inflation, according to a US consumer credit reporting agency.
Total credit card balances reached $930 billion in the final quarter of 2022, up from $785 billion in the same period in 2021, TransUnion said in its quarterly report. “Whether it’s shopping for a new car or buying eggs at the grocery store, consumers continue to be impacted by both high inflation and interest rate hikes by the Federal Reserve, which we believe may continue at least a few more months,” Michelle Ranieri, vice president of U.S. research and consulting at TransUnion, was quoted as saying by the agency.
“If more moderate rate hikes continue, it would be a good sign that the hikes are working and that some relief from high inflation may be on the horizon. Until then, we fully expect consumers to continue to look to credit products such as credit cards, HELOCs, and unsecured personal loans to make ends meet and put themselves in a stronger financial position going forward,” she added.
According to the report, the number of credit cards reached 518.4 million at the end of 2022, up from 485.9 million the previous year. Although more Americans are turning to credit cards to keep up with inflation and in most cases prefer to carry a credit card balance over a period of time, the Fed’s interest rate hikes mean that cardholders have more -high variable interest rates and if they don’t pay the entire balance on time, they pay higher interest. In seven hikes last year, the U.S. central bank raised interest rates by a total of 425 basis points to combat record-high inflation that has been slowing.