Consumers throughout Virginia and the rest of the U.S. paid credit card companies more than $113 billion in fees and interest in 2018, according to the New York Federal Reserve’s latest Quarterly Report on Household Debt and Credit. That figure represents a 12% year-over-year increase, and it’s $37 billion more than Americans paid in 2013. Credit card interest charges and fees are expected to keep climbing; analysts predict that they will surpass $122 billion by the end of 2019.
The Federal Reserve increased interest rates four times in 2018. Higher annual percentage rates are largely responsible for the increased credit card borrowing costs. Data from the central bank reveals that the average credit card interest rate has now risen to 16.86%, which is nearly 4% higher than it was in 2014. This is bad news for the approximately 40% of credit card holders who do not pay their bills in full each month.
Higher interest rates make it even more difficult for these Americans to escape the credit card debt trap. The average credit card balance is now $6,354. A consumer who owes this amount and sends an additional $100 each month to pay it down would need more than 13 years to clear their debt at today’s interest rates.
Many Americans find themselves with unmanageable financial situations after turning to credit cards during medical emergencies or periods of unemployment. The nation’s bankruptcy laws were created to help individuals in just this kind of situation. An attorney with debt relief experience could explain how filing a Chapter 7 or Chapter 13 personal bankruptcy petition may provide an opportunity for a fresh start. The automatic stay issued when a bankruptcy is filed also offers relief from creditor harassment as it puts an immediate end to collection efforts.