By Khristopher J. Brooks
/ MoneyWatch
Americans in their 30s struggle with debt
Americans are in debt by a combined $16.9 trillion, with that financial burden weighing especially heavily on older millennials, new governmentdatashows.
People ages 30 to 38 account for nearly $4 trillion of total household debt in the U.S. For millennials, that's a 27% increase in debt compared to 2019 — a steeper hike than any other generation, Yahoo Finance reporter Akiko Fujitatold CBS News.
Millennials are racking up debt due to soaring inflation, Fujita noted. Consumer prices have skyrocketed in the last year, particularly for gas, child care and food.
"You've also got the [Federal Reserve] raising interest rates at a very rapid pace, which means higher rates for your credit card [and] your car payments," she said.
The economy's swift rebound from thepandemic, coupled with surgiing inflation, has spurred the Federal Reserve to sharply hike its benchmark interest rate in an effort to curb prices and slow wage growth. The central bank's aggressive monetary tightening has lifted borrowing costs.
For example, a record share ofAmericans are paying more than $1,000 a monthfor their car note now that auto loans rates are north of 6% for new and used vehicles. The average credit card rate in the U.S. is now 20.3%, up from 17.9% six months ago,according to CreditCards.com.
Fujita said there are a few ways millennials can start paying off their debt, including using their tax refund to chip away at the balance. Another option is to consolidate those debts by getting a personal loan, using the funds to pay off the credit card balances and then repay the one loan.
Fujita also recommended calling your credit card issuer and simply asking for a lower interest rate.
"Sure, you may not get it down to 0, but you get it down from what is now a roughly 20% APR," she said.
Editor's note: The headline on this story has been updated.
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I'm an experienced financial expert with a deep understanding of economic trends and financial challenges facing individuals. My knowledge spans various aspects of personal finance, including debt management, inflation's impact on consumer prices, and the intricacies of interest rates.
Now, let's delve into the concepts mentioned in the article you provided by Khristopher J. Brooks on MoneyWatch:
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Total Household Debt:
- The article states that Americans are in debt by a combined $16.9 trillion. This is a key indicator of the financial health of households and reflects the overall borrowing and spending patterns.
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Millennial Debt Trends:
- The focus of the article is on millennials aged 30 to 38, who account for nearly $4 trillion of the total household debt. There's a notable 27% increase in their debt compared to 2019, highlighting the financial challenges faced by this specific age group.
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Causes of Millennial Debt Increase:
- The article attributes the surge in millennial debt to factors such as soaring inflation, with notable increases in consumer prices for essentials like gas, child care, and food. The Federal Reserve's rapid interest rate hikes are also identified as contributing to higher credit card and car payment rates.
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Federal Reserve's Monetary Tightening:
- The economic rebound from the pandemic and rising inflation have prompted the Federal Reserve to aggressively tighten its benchmark interest rate. This policy aims to control inflation and slow wage growth but has the side effect of raising borrowing costs for consumers.
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Impact on Auto Loans and Credit Card Rates:
- The article highlights that a record share of Americans is now paying more than $1,000 a month for their car loans due to higher auto loan rates. Additionally, the average credit card rate in the U.S. has increased to 20.3% from 17.9% six months ago, as reported by CreditCards.com.
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Debt Repayment Strategies for Millennials:
- Suggestions for millennials facing debt include using tax refunds to reduce balances, consolidating debts with personal loans, and negotiating with credit card issuers for lower interest rates.
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Inflation's Role in Debt Accumulation:
- The article emphasizes the impact of inflation on millennials' debt, particularly its influence on rising prices for essential goods and services, contributing to financial challenges.
Understanding these concepts is crucial for individuals navigating their finances, especially in times of economic shifts and policy changes. If you have any specific questions or need further insights on these topics, feel free to ask.
