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Credit card balances grow 13% as inflation outstrips wage growth


Wages are rising – but not enough to keep up with the rising cost of living.

Although average hourly earnings are up 5.1% from a year ago, prices have risen much faster. The consumer price index, which measures the average change in prices for consumer goods and services, higher than expected 9.1% in Junefastest rate in more than four decades.

To bridge the gap, many consumers are relying on credit to get through, which helped push total credit card debt to $890 billion.

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Overall, credit card balances grew 13% in the second quarter of 2022, marking the biggest annual increase in more than 20 years, according to a report from the Federal Reserve Bank of New York.

Even so, the balance is still slightly below pre-pandemic levels, after falling sharply in the first year of the pandemic.

An additional 233 million credit card accounts were opened in the quarter, the most since 2008.

Consumers don’t feel ‘financially safe’ from a recession

In an attempt to cool down the economy, in July Federal Reserve Long walk its target federal funds rate via 0.75 percentage points second time in a row.

Amid recession fears and rising interest rates, more than half, or 56 percent, of consumers said they have seen their standard of living decline, according to a recent report from financial services website Personal Capital.

Even more, about 69%, say their incomes have not kept pace with inflation, and less than half say they feel “financially secure” for another recession, according to the report. surveypolled more than 2,000 adults in May.

Americans now say they need to earn about $107,800 a year to feel “financially healthy”, nearly double the national average but down 13% over the past six months, the report found.

“If everything costs more, that can reset your expectations of what it takes to feel good,” says Paul Deer, a certified financial planner and vice president at Personal Capital. feel financially healthy.

“People are placing a higher priority on simply having a job and lowering their expectations,” he added.

How to feel ‘financially healthy’

Pictures of Tetra | Pictures of Tetra | beautiful pictures

How much money you need to earn to cover your expenses and save for the future depends on understanding your net worth and goals, says Deer.

Your net worth is essentially the sum of all your assets, including cash, retirement accounts, college savings, homes, cars, investment properties, and valuables like art art and jewelry less any liabilities or long-term debt, such as mortgages, student loans, revolving credit card balances, and any other personal loans.

“First and foremost, has your net worth increasing or decreasing over time?” If your net worth is in the red, you’ll need to try to save more and spend less.

First and foremost, has your net worth increasing or decreasing over time?

Paul Deer

vice president at Personal Capital



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