Credit card debt in America recently topped 1-trillion dollars for the first time, according to a recent report from the Federal Reserve Bank of New York. Melody Townsend is a certified financial planner and the owner of Townsend Financial Planning, which is headquartered in Lexington. She said the Federal Reserve’s hiking of interest rates to battle inflation is one factor in the increase.
“It is definitely having a negative impact on clients ability to pay back their credit card debt or consumer debt in general.”
Macy’s recently reported a spike in customers failing to make monthly payments. Townsend said some people forget that zero-interest credit cards don’t stay that way for long.
“And then once that promotional rate runs out, or they get behind on a payment, then those rates can go north of 19 20%. Right now, some we see are 26%.”
Townsend said people should pay off their high-interest credit cards first, but some choose the good feeling they get by paying off those with lower balances. She said it’s best to only charge what can be paid off each month.
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