Prices in the U.S. are rising, and more and more Americans are struggling to pay their credit card bills.
Hector Gomez is one of them. ARD tells us about the man who recently discovered that he owed $21,000 to the bank. He began to wonder how he would get out of this situation, and today he admits that he was very afraid.
Gomez is not alone in this situation. According to the Federal Reserve in New York, U.S. households are about $18.8 trillion in debt - through mortgages, car loans, student loans and credit cards.
The largest percentage of the amount comes from mortgages. Car loans have also been at record highs recently, and credit card debts are also increasing. According to the latest estimates, they were about $1.26 trillion for the United States, which means about $6,600 for every American who owns a credit card.
Many Americans live on credit
More and more people in the United States are trying to get rid of their loans, Ted Rossman of the non-governmental consulting organization Money Management International told ARD. People come to him with huge debts - on average with about $40,000 in credit card loans.
Rossman says that getting into debt is extremely easy. Unlike in Europe, in the United States credit cards are used to cover everyday expenses, he says.
At the same time, life in the United States is becoming more expensive. Inflation continues to cause problems for Americans, and sales are declining, as it becomes increasingly difficult for people to afford a number of products and services. At the same time, outlet stores are seeing record revenue, writes ARD. Hector Gomez says he uses his credit card for groceries, dog food, public laundromats and dining out. "I thought there was no limit to this money", says the man, who used three different credit cards after his wife lost her job during the pandemic.
"I always paid the minimum payment", Gomez admits. With the most common type of credit card in the United States, it is possible to make only a minimum or partial payment, and the debt can be transferred to subsequent months without being fully paid off. This both lengthens and increases the debt. Credit card interest rates are very high - on average they are about 21%, and in Gomez's case - almost 30%.
Getting out of the debt spiral
"They make it easier to get the money, but they don't explain how to get out of this situation," says Gomez. For a long time he himself did not understand at all how the interest system works. In the end, the man sought help from a consulting company. There, employees tried to negotiate with the banks for better repayment terms and lower interest rates. They managed to cut his interest rate in half - to 15%. This was the first step towards getting out of debt. Since then, Hector Gomez has been carefully monitoring his income and expenses.
More and more people are turning to Ted Rossman with increasingly large debts, and the debtors are getting younger and younger. According to him, Generation Z is the fastest-growing group of customers. "Last year, demand for our services in this age group increased by 35 percent", the specialist explains to ARD. Young people enter the job market at a time of extremely high living costs, but often have to make do with low starting salaries. Those who still have student loans to repay have less money to live on - then they either cover the difference with credit cards or turn to "buy now, pay later" services.
According to Rossman, his young customers have an average of $ 20,000 in credit card debt and other unsecured loans. In many cases, this is added to a student loan with an average value of $ 35,000. This represents a significant financial burden at the beginning of their careers. High inflation among young professionals is difficult to compensate for by income growth, which leads to increasingly serious indebtedness. And so many find themselves in the situation of Hector Gomez, who only manages to get out of debt after years, summarizes ARD.
Author: Melanie Boeff ARD