During the pandemic, millions of Americans picked up the habit of paying down their credit cards. Now, as the economy begins reopening, new data suggests many of us have already kicked that habit.
Right now, it is an economy on the mend. You can hear live music in the air again. Restaurants are serving meals. Travelers are zipping through airports toward their big vacations, and people are using their plastic again.
“We don’t want things to go back to exactly the way they were,” said CreditCard.com’s senior industry analyst Ted Rossman as he reacted to the Federal Reserve’s report of a 10% jump in credit use this past May. That is the biggest jump that borrowing benchmark has seen since 2016, and it is a major course change compared to last year when consumer credit use actually dropped.
“It’s like, I want to do this, I want to do that. I want to travel. I want to go to this event, this game and this concert,” said Rossman. “We’re thankful things are better but it’s not going to be any fun to have a hefty credit card bill. So, that’s something I’m worried about.”
He points out the average credit card’s interest rate is still a high 16%, which could send average card balances right back up. Inflation isn’t helping. May saw a 5% jump in the one-year price increase rate, or inflation rate, according to the Bureau of Labor Statistics. That is the biggest increase in over 13 years, and it sits on top of April’s 4.2% increase.
Dramatically rising prices of goods and services could prompt consumers to reach for their credit cards. But even if we are feeling positive about the economy and our own financial outlook, Rossman says we should keep our credit card use, in check.
“When you don’t have debt, it does open up a lot of other avenues,” said added. “You can make a lot more choices, whether it’s investing or changing jobs or buying a house, or even just sleeping better at night.”