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More people turn to credit cards amid inflation; US sees record debts

A record number of Americans are signing up for credit cards and building up personal loan debt.

ARKANSAS, USA — Pandemic lows and inflation highs have left many people looking for ways to save, including UA Little Rock law student Brianna McDonough, who started classes this month.

"Things are more expensive. I just had to get my books and wasn't expecting to spend as much as I had to," McDonough said.

So like millions of others, she started looking at getting a credit card this year.

"...with everything going on with inflation, I get cashback on a lot of my purchases with the credit card I have. So that's super beneficial to me right now," she added.

Amid inflation, a record amount of people have signed up for credit cards and built up personal loan debt.

RELATED: Democrats passed the Inflation Reduction Act Friday. Here's what it will do.

According to Fidelity, in 2022, 8.3 million more Americans are new cardholders with an average of $453 more in debt compared to last year.

Scott Inman, a financial planner with GenWealth Financial Advisors, explained what the credit reliance could come as, "...during the pandemic, we had a lot of checks going out, and people had cash reserves built up... but we've settled into a longer pattern now of high prices, and that those cash reserves are running out."

Inman added that consumers should always prepare for hard financial times—  if they can.

"If you live a long life in the United States, there's going to be high inflation at some point in your life. So all those things need to be planned for in advance," Inman said.

This has led to major credit card companies like Chase, US Bank, and Simmons Bank to offer new deals.

Chris Ewing, head of Consumer Finance at Simmons Bank explained, "When you're looking at credit cards, what you're really trying to do is understand, you know, what are the rewards I'm getting for the card? And what are the benefits?"

Many of the credit card offerings right now are geared toward new customer needs in the current financial climate.

"We have a balance transfer opportunity. So 0% interest for 12 months, if you, you know, make a balance transfer within the first 60 days. So, we, you know, that's one thing that can provide immediate kind of cash flow relief," Ewing added.

But Inman said that interest rates could come back to haunt consumers if they're not careful.

"When you think about the interest rate on a credit card, if you don't make that full payment every month, your interest rates are much higher than even inflation is," he explained.

And while pandemic stimulus checks did encourage more spending, UA Little Rock Chief Economist Michael Pakko said that another deposit probably won't appear in our future.

"The problem there is that... part of the process that feeds inflation is the very strong consumer spending. And so it's all kind of wrapped up into one big bundle," Pakko said.

But some advisors said that the latest inflation data showed a light at the end of the inflation tunnel could be coming soon.

"You know, never should we applaud 8.5% inflation, but it does show that possibly we're past the peak, and possibly these prices might be starting to come down," Inman added.

But for now, the focus of thousands will continue to be budgeting with the current high prices.

"I'm trying to figure out, you know, how much am I going to have to make? And how much do I need to budget out to subsidize my living costs and pay for school and pay for all these extra things," McDonough said.


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