Americans pay off $40 billion in credit card debt

Total debt still teeters near one trillion dollars

Chris Miller
June 12, 2018 - 2:27 pm
Categories: 

A lot of Americans spent the first three months of the year getting after their credit card debt. But for those who didn't, their debt could be about to get worse.

According to Wallet Hub, the first quarter this year saw the second-biggest quarterly pay-down of credit card debt ever. Consumers pair off $40.3 billion in debt.

As the economy improves, the fed could soon be raising interest rates again, meaning people who got their credit cards paid off may have avoided interest rate increases.

"When the fed raises rates, those borrowing costs trickle throughout the economy," said local financial planner Brad Fortier, of Fortier Financial.

Fortier said borrowers still working on their credit card debt could soon see more of their money going to interest.

"The higher the interest rate means the fewer dollars going toward paying down that principal balance," Fortier explained.

Fortier says a common method of debt reduction, using a home equity loan to consolidate debt with a lower interest rate, no longer has the benefit of tax-deductible interest. But he said rates on home equity loans are still only about a fifth of what most credit cards charge.
 

Comments ()