By Busra Nur Cakmak
ANKARA (AA) – Americans are turning to credit cards more and more to cope with high inflation, according to a US consumer credit reporting agency.
Total credit card balances reached $930 billion in the last quarter of 2022, rising from $785 billion in the same period of 2021, TransUnion said in its Q4 2022 Quarterly Credit Industry Insights Report on Wednesday.
“Whether it’s shopping for a new car or buying eggs in the grocery store, consumers continue to be impacted in ways big and small by both high inflation and the interest rate hikes implemented by the Federal Reserve, which we anticipate may continue for at least a few more months,” said Michele Raneri, the vice president of US research and consulting at TransUnion, quoted by the agency.
“If more moderated rate hikes continue, it would be a good sign that the increases have been working, and that some relief from high inflation may be on the horizon. Until then, we fully expect consumers to continue to look to credit products such as credit cards, HELOCs and unsecured personal loans to help make ends meet and put themselves in stronger financial standing moving forward,” she added.
The number of credit cards reached 518.4 million at the end of 2022, rising from 485.9 million the year before, according to the report.
The average debt per borrower rose to $5,805, up from $5,127, during the same period, TransUnion said.
Although more and more Americans are turning to credit cards to cope with inflation and mostly prefer carrying a credit card balance for some period, the Fed's rate hikes are causing cardholders to have higher variable interest rates, and if they do not pay the full balance when it is due, they pay more interest.
The Fed on Wednesday raised its benchmark interest rate by 25 basis points, which is a slowdown from December's 50 basis points rate hike.
In seven hikes last year, the US central bank raised interest rates by a total of 425 points to fight the record-high inflation, which is slowing its pace.
Annual consumer inflation in the US came in at 6.5% in December, easing from 7.1% in November, while producer inflation dropped to 6.2% in December from November’s 7.3%.
* Ovunc Kutlu in Istanbul contributed to this report.