Americans are Spending More on Credit Card Interest

In the world of personal finance, credit cards have been a divisive subject. While there are sites dedicated to the benefits of credit cards including travel rewards and cash back, there are those (perhaps most notably Dave Ramsey) who rail against such products because of the high interest rates they carry. Now the latter group has even more statistical ammo for its arsenal as new data shows that Americans are not only spending more in credit card interest but the level they’re paying has increased by nearly 50% in the past half decade.

According to a study by MagnifyMoney, credit card balances are currently at an all-time high, hitting $1.03 trillion in January. As a result Americans paid a total of $113 billion in credit card interest last year, marking an increase of 12% from 2017 when interest payments totaled $101 billion. What’s more, it looks as though this figure will increase once again, with Magnify currently anticipating a $122 billion grand total for 2019.

Amazingly the amount of credit card interest Americans paid has increased by 49% over the past five years. Part of that trend that can be attributed to rising interest rates. Currently MagnifyMoney says the average credit card APR is 16.86% — which marks a four-point increase over five years ago.

This reality is exacerbated by the number of Americans who fail to pay off their credit card balances each month. The latest study found that 43.8% of credit card accounts aren’t paid in full each month. Additionally these accounts represent 71% of total balances. Similarly, of the 176 million Americans that actively use credit cards, 70 million carry balances from month to month.

On the other hand, 30.4% of credit cardholders use their cards but pay off their balances in full each month. Meanwhile another 25.8% have cards they don’t actively use. In other words the majority of Americans are seemingly using their credit responsibly.

Regardless, the trends observed in this latest report do offer cause for concern. Although the amount of debt and interest Americans are collectively incurring is bad enough on its own, it’s also worth noting that this increase is occurring during economically prosperous times. Were the U.S. to slip into a recession any time soon, these outstanding balances could quickly cause crisis. Hopefully these developments can still be turned around and more consumers will begin using credit cards to their advantage instead of to their detriment.

Author

Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded DyerNews.com in 2015 to focus on personal finance and the emerging FinTech markets.

Other Articles by Jonathan Dyer

Bilt Extends Rent Day Promotion for Black Friday and Beyond

In October, the unique Bilt Mastercard unveiled its inaugural Rent Day promotion, which included the opportunity for cardholders to earn double rewards and nearly all of their purchases on the first of the month. That deal returned in November alongside the addition of a United Airlines status match offer and more. Now, just in time for Black Friday, Small Business Saturday, and Cyber Monday, Bilt is extended December's Rent Day...

Venmo App Adds Charitable Giving Interface

Although Thanksgiving and retail holidays such as Black Friday, Small Business Saturday, and Cyber Monday may be on the minds of many people, a popular peer-to-peer payment app is looking ahead to Giving Tuesday. This week, Venmo announced the rollout of a new interface that will make it easier for users to discover and donate to various charities. The feature is now live in the latest version of the Venmo...

American Express Introduces New Credit Card Approval Process

For some consumers, applying for a new credit card can be anxiety-inducing as there's a chance that they could not only be declined for the product but also have their credit impacted by the credit inquiry. To give these applicants better peace of mind, American Express is rolling out a new approval process. Amex has announced a new pilot program for its U.S. Personal Cards (meaning non-business cards) that will allow...