While some economists predict interest rates will spike during the recession this year, credit card experts are advising consumers to pay off credit card debt as soon as possible.
“A lot of people are worried about a recession,” Bankrate.com senior analyst Ted Rossman told FOX Business’ Madison Alworth on Wednesday. “I mean, there’s kind of only one way to get these things done.”
The Federal Reserve’s monthly revolving credit report, which includes credit card balances, showed a balance of $1.103 trillion, up more than 19% year-over-year and topping pre-pandemic levels.
And with rates set to rise 75 basis points, as reported by the Fed on Wednesday, Rossman warned that credit card interest is taking the highest borrowing rate to more than 16% and could create a financial problem. indebtedness even higher in the months to come.
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“I don’t really see large-scale caution right now, but I also know things are changing quickly,” Rossman explained. “And we’re talking right now about significantly higher interest rates, the stock market going down.”
Consumers have already shown signs of adjusting their habits as the May retail sales report missed growth estimates and instead fell 0.3%.
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The data comes as consumers face the worst spike in inflation since 1981: the government announced last week that the consumer price index rose 8.6% in May, far more than expected by economists.
The reading highlighted just how strong inflationary pressures in the economy still are.
“Sales plunged on an inflation-adjusted basis, paring most of April’s gains,” said Tuan Nguyen, US economist at RSM. “That implies more headwinds for consumer spending in the second quarter. But that won’t be the Federal Reserve’s primary concern as it focuses on reducing inflation.”
Megan Henney of FOX Business contributed to this report.