The New York Fed is set to release data for the first quarter of 2022 tomorrow. Experts are predicting that this data will reveal both credit card debt and interest rates reaching record highs. Ted Rossman, senior industry analyst at Bankrate, joins Cheddar News to discuss what this means for consumers, the economy, and more. 

Cheddar's News Wrap

Credit Card Debt Could Soon Hit Record High

master checkers. News wrap everyone the new york. Fed is set to release data for the first quarter of 2022 tomorrow, revealing americans. Total credit card balances, experts are predicting that this data will show both credit card debt and interest rates reaching record highs, joining me now to discuss this. Ted Rossman, senior industry analyst at Bankrate. Ted welcome back to the show, explain what this means for individuals and why us americans should care about what's happening tomorrow. I would note first off that this report looks at total balances. It doesn't distinguish between what's truly death in the sense of carrying interest and what's paid in full at the end of the month. We know from other data that it's roughly half and half. So there's really a huge difference here. The average credit card charges 16.5% and that could be almost 19% by the end of the year. So if you have credit card debt, forget about rewards, prioritize that interest rate perhaps via 0% balance transfer card. So credit card companies are reporting customers spending more in March 2022 than any other month on record. Ted I'm so curious here what's the drive behind that inflation is part of it? Pent up demand is part of it as well. People are definitely eager to get back to restaurants and on airplanes and hotels and some of that actually is good for the economy in the sense of our consumer driven economy, it's maybe not great for your credit card balance, especially if you're carrying debt. A lot of people are sitting on increased savings. That's why we're not terribly worried about this because delinquencies are still really low, The debt to income ratio is still really low. I don't want you carrying credit card debt at 15 2025%. But if you're the kind of person who can pay in full and this is maybe more reflective of chasing rewards on stuff you would have bought anyway or e commerce. That's another thing you can't use cash online. So there are different things driving More credit card usage. But we're definitely back to our old pre pandemic ways. So let's go back to the data being released tomorrow. How do you think it'll compared to 2021 even 2020 tabs? I think there's a good chance we'll see a new record. It would take an 8.3% increase From the fourth quarter to the first quarter to get that it's going to be close. But we mentioned that MX data that their customers spent 35% more in March, year over year. Other banks said similar things. So we're definitely seeing a lot of spending. I think it's going to be close. But I think the bigger point here is balances are going up. This is resuming the pre covid trend really 2020 was the anomaly. When people used their stimulus to pay down debt, they spent less for a while. This is a return to a previous trend line. What's different now is high inflation And high interest rates which are supposed to combat inflation but will make it harder to pay off those credit card balances. So go for the balance transfer card. Think about nonprofit credit counseling, maybe a personal loan. If you can get a low rate, we want to pay off these balances. Let's talk about inflation. Like you mentioned, this is the highest we've seen in 40 years. How do you think this is going or is playing into things? It is part of it. Visa mentioned on their recent earnings call that to be honest, they are a net beneficiary of inflation at least to the extent that if people are buying the same amount of stuff and it costs more, their processing more dollars. The wild card here is if people were to cut back and we're really not seeing that yet because if they were to cut back, I think travel and dining would be among the first to go. It's harder to cut back on gas groceries, housing those daily necessities. But people are spending robustly on discretionary items. Still some on goods, but especially on services, I think this is one to watch and it's sort of a push pull for different parts of the economy, good for the economy if people are buying stuff, but maybe not good for your personal credit card balance. So that's where we want to be mindful of your own debt and your own interest rates. Always great advice. I love getting your emails in the morning. Ted I always feel like I'm prepared for my day. Ted Rossman, senior industry analyst at Bankrate. We appreciate it. Thank you.