Credit card debt is at record high as Fed raises rates again

Credit card debt is at record high as Fed raises rates again

NEW YORK — As the Federal Reserve raises interest rates again, credit card debt is already at a record high, and more people are carrying debt month to month.

The Fed’s interest rate increases are meant to fight inflation, but they’ve also led to higher annual percentage rates (APRs) for people with credit card debt, which means they pay more in interest. The Fed announced Wednesday that it would increase rates another quarter of a point.

Federal Reserve Credit Card Debt

Credit card logos are displayed on a business’s door July 5, 2021, in Cambridge, Mass. 

With inflation still high, people are leaning on their credit cards more for everyday purchases.

“It’s the economy, inflation, gas prices and food costs,” said Lance DeJesus, 46, kitchen manager at the Golden Corral in York, Pennsylvania. “A year ago, you could go to the grocery store with a hundred bucks and come out with a bunch of bags. Now, I come out with just one bag.”

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DeJesus said he carries a credit card balance of roughly $2,600 from month to month over several cards, which have interest rates from 16.99% to 21.99%.

Early in the pandemic, when DeJesus lost his job, he said that unemployment payments, stimulus checks, and child tax credits (which went to his household via his wife, who has three children) all helped him stay afloat. Now, with COVID-era emergency relief and stimulus policies ending, he uses credit for emergencies.

He’s not alone: 46% of people are carrying debt from month to month, up from 39% a year ago, according to, an online financial information site.

Bankrate says the average credit card interest rate, or annual percentage rate, has reached 20.4% — the highest since their tracking began in the mid-1980s.

A new poll by The Associated Press-NORC Center for Public Affairs Research finds 35% of U.S. adults report that their household debt is higher than it was a year ago. Just 17% say it has decreased.

Roughly 4 in 10 adults in households making under $100,000 a year say their debt is up, compared with about a quarter in households making more than that. About half of Black and Hispanic adults say their household debt has increased, compared with about 3 in 10 white adults.

The U.S. Federal Reserve raised interest rates .25% despite banking turmoil. CNN’s Kristie Lu Stout interviews economics analyst Ryan Patel.

Data also shows more people are falling behind on payments, according to Bankrate analyst Greg McBride. He sees this as evidence of a so-called “K-shaped recovery” from the pandemic, in which the distance between the haves and the have-nots grows larger.

“The more than half who pay in full each month are clearly doing a lot better than the almost half who don’t,” McBride said. “Those who tend to carry balances tend to be younger people, people making lower incomes, and those with lower credit scores. Another factor contributing to rising debt is inflation, which means the cost of day-to-day living is outpacing paychecks.”

Typically, on a national scale, it takes something pretty extraordinary for credit card balances to fall, economists agree. The Great Recession, beginning in 2008, and COVID, beginning in 2020, are two periods when they fell sharply.

During the early pandemic, credit card debt dipped 17%, Bankrate said — thanks in part to stimulus programs, emergency relief, and a decrease in consumer spending.

But in the last three months of 2022, credit card balances in the U.S. increased $61 billion to $986 billion, surpassing the pre-pandemic high of $927 billion, according to the Federal Reserve Bank of New York.

Using a credit card can provide protections for people who can pay off the balance every month. But the cost for those who can’t is high.

“What’s not good is carrying balances, paying interest, and falling behind,” McBride said. “No one wants to be paying 20% every month.”

For Gary Deuvall, 68, of Walls, Mississippi, who worked servicing and repairing motorcycles, stimulus checks brought some financial relief even though the pandemic hurt his business.

Now retired and on Social Security, Deuvall and his wife still have some credit card debt, he said, “in the five figures,” but they’ve also transferred that balance to a zero percent interest card to help contend with high rates.

Zero percent interest offers are generally available only for a limited period, sometimes up to 21 months, and banks sometimes charge a flat fee, such as 3% of the balance transferred.

“We’d hoped to build or buy a house,” Deuvall said. “But interest rates are so high, that’s on pause. Meanwhile, I’ll just rent.”

Dan Stokes, 31, a special education teacher based in Richmond, Virginia, said that a pause on student loan payments that began during the pandemic has helped him make ends meet, but he still carries about $8,000 in credit card debt from month to month across at least three cards.

Of that, Stokes said he’s moved about $1,200 to a zero percent interest card for the next twelve months.

“Honestly, it feels really good that I don’t have to make those student debt payments at the moment,” he said of the emergency policy, which has been extended until the summer. “My pay as a teacher hasn’t kept up with inflation, so there are times when I’m swiping my credit cards just to get by and make it through.”

Credit card rates are one of the fastest ways higher interest rates hit consumers.

“Most car loans and mortgages are fixed-rate. So if you’re new to the market, it has a big effect, but if you have an existing loan, it’s not affecting you,” McBride said. “With credit cards, the higher interest rate gets passed through pretty much right away.”

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Prince William County buys Gander Mountain building in Woodbridge for $15M

Prince William County buys Gander Mountain building in Woodbridge for $15M

Prince William County officials announced Thursday the county will purchase the former Gander Mountain property in Woodbridge for $15.2 million. 

The former outdoors equipment store shuttered in 2017, leaving the 155,309-square-foot space without a tenant. The county has been leasing the space on and off since 2021, paying about $25,000 per month to 14041 Worth Avenue Holdings LLC to operate COVID-19 vaccine clinics. 

With the clinics over, the county is planning to convert the store into its first crisis receiving center to divert people facing mental health crises from local hospitals and jails. To do so, the county entered into an 11-year lease for the building. Now, that lease will be nullified.

According to Thursday’s announcement, the county was the winning bidder at auction for the building, which was originally built in 1996, at $15.2 million. The property was most recently purchased by 14041 Worth Avenue Holdins LLC for $15.7 million in 2018 and was assessed at a value of $21.2 million – its high mark – in 2008, according to county records. 

“I am grateful for county staff that was able to act quickly to make this purchase a reality. The county will benefit in the long run from this action,” Board of Supervisors Chair Ann Wheeler said in a statement to InsideNoVa. 

Scheduled to open in 2024, the crisis receiving center will cost about $18 million to set up, not including the new purchase price of the building. Most of that one-time funding will come from the state, with the county paying $4 million to the buildout and planning to budget $2.7 million annually for its operation. 

“The acquisition of the building ensures that the Crisis Receiving Center will be able to remain at the site for years beyond the 11-year lease it signed with the current owner,” the county’s communications office said in a news release. “By purchasing the property, the county now has the assurance that the investment of $18 million in build-out expenses related to the Crisis Receiving Center space will not have to be duplicated after 11 years, ultimately resulting in cost savings.”

Prior to this week, there had been no public discussion on the possibility of purchasing the property. But on Tuesday night, the Board of County Supervisors used the very end of its meeting to approve the purchase. Occoquan Supervisor Kenny Boddye made the motion, which was not on the agenda, to authorize the purchase. It passed in a 6-2 vote, with Republican supervisors Bill Weir (Gainesville) and Jeanine Lawson (Brentsville) dissenting. 

Discussions of property acquisition typically take place in the closed session portion of county board meetings as to not weaken the government’s negotiating position. But Weir said that possibly spending up to $20 million on the property with little discussion would be irresponsible.

“I’ve got a problem with it philosophiocally with dumping $20-plus million outside of the adopted [capital improvement program] and without consideration of the impact of this expenditure on the existing CIP projects since we’re putting it ahead of the line,” Weir said in response to Boddye’s motion. “I personally believe it’s poor public policy to expedite an acquisition of this magnitude in 14 days from presentation to allocation, regardless of how good the opportunity appears. That time frame makes due diligence difficult, if not impossible.”

Lawson agreed, saying she was “not comfortable” with the purchase and calling it “rushed.” 

According to the county’s press release, the county will “remit a nonrefundable earnest money deposit” of $1 million on Thursday, and the sale will officially close within 45 days. 

“This Board secured $18 million in combined federal, state, and local funds to deliver on our promise of bringing crisis-based mental health services to the people of Prince William,” Supervisor Boddye said via email. “With the Gander Mountain purchase, we protect that investment and demonstrate our long-term commitment to increasing access to mental health services in our community.”

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Credit card debt is at record high as Fed raises rates again

Eggs, strawberries, and 12 other groceries that dropped in price last month

Stacker used Bureau of Labor Statistics data to find the grocery items that saw the largest price decreases from January to February.

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Credit card debt is at record high as Fed raises rates again

Stocks fall, bond yields tumble after Fed's latest rate hike

NEW YORK — Stocks fell sharply Wednesday after the Federal Reserve indicated the end may be near for its economy-crunching hikes to interest rates, but it also doesn’t expect to cut rates soon despite Wall Street’s hopes.

The S&P 500 fell 1.6% in its first drop in three days. The Dow Jones Industrial Average lost 530 points, or 1.6%, while the Nasdaq composite dropped 1.6%.

Some of the sharpest drops came again from the banking industry, where investors are worried about the possibility of customers yanking their cash and causing more collapses. They slid after Treasury Secretary Janet Yellen said Wednesday she’s not considering blanket protection for all depositors at all banks, unless they present a risk to the overall system.

Stocks of smaller- and mid-sized banks fell sharply. First Republic Bank dropped 15.5%, and PacWest Bancorp. fell 17.1%.

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Stocks saw little change for much of the day, before the Fed raised its key rate by a quarter of a percentage point in its campaign to drive down inflation. The bigger question was where the Fed is heading next. The Fed hinted it may not hike rates much more as it assesses the fallout from the banking industry’s crisis.

Instead of repeating its statement that “ongoing increases will be appropriate,” the Fed said Wednesday it now only sees “some additional policy firming may be appropriate.”

The Fed also released the latest set of projections from its policymakers on where rates are heading in upcoming years. The median forecast had the federal funds rate sitting at 5.1% at the end of this year, up a smidge from where it currently sits, in a range of 4.75% to 5%.

That’s also the same level as seen in December, and it’s counter to worries in the market that it could rise given how stubborn high inflation has remained.

That helped send yields slumping in the bond market, which has been home to some of the wildest action this month.

The yield on the two-year Treasury, which tends to track expectations for the Fed, tumbled to 3.96% from 4.13% just before the projections were released. It was above 5% earlier this month.

All told, the S&P 500 fell 65.90 points to 3,936.97. The Dow dropped 530.49 to 32,030.11, and the Nasdaq fell 190.15 to 11,669.96.

Some of the biggest excitement was around what are called “meme stocks.”

GameStop shot up 35.2% after it reported a surprise profit for its latest quarter. Analysts were expecting another loss for the struggling video-game retailer. In early 2021, hordes of smaller-pocketed and novice investors piled into the stock, sending its price surging.

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Federal Reserve raises its key rate by a quarter-point; calls banking system 'sound and resilient'

Federal Reserve raises its key rate by a quarter-point; calls banking system 'sound and resilient'

WASHINGTON (AP) — The Federal Reserve extended its year-long fight against high inflation Wednesday by raising its key interest rate a quarter-point despite concerns that higher borrowing rates could worsen the turmoil that has gripped the banking system.

“The U.S. banking system is sound and resilient,” the Fed said in a written statement released after its two-day meeting.

At the same time, the Fed warned that the financial upheaval stemming from the collapse of two major banks is “likely to result in tighter credit conditions” and “weigh on economic activity, hiring and inflation.”

The central bank also signaled that it’s likely nearing the end of its aggressive series of rate hikes. In a statement it issued, it removed language that had previously indicated that it would keep raising rates at upcoming meetings. The statement now says “some additional policy firming may be appropriate” — a weaker commitment to future hikes.

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And in a series of quarterly economic projections, Fed officials forecast that they expect to raise their key rate just one more time – from its new level Wednesday of about 4.9% to 5.1%. That is the same peak level they had projected in December.

The latest rate hike suggests that Chair Jerome Powell is confident that the Fed can manage a dual challenge: Cool still-high inflation through higher loan rates while defusing the financial upheaval in the banking sector through emergency lending programs and the Biden administration’s decision to cover uninsured deposits at two failed U.S. banks.

The Fed’s decision to signal that the end of its rate-hike campaign is in sight may also soothe financial markets as they continue to digest the consequences of U.S. banking turmoil and the takeover last weekend of Swiss bank Credit Suisse by its larger rival.

The Fed’s benchmark short-term rate has now reached its highest level in 16 years. The new level will likely lead to higher costs for many loans, from mortgages and auto purchases to credit cards and corporate borrowing. The succession of Fed rate hikes have also heightened the risk of a recession.

The Fed’s latest decision, after a two-day policy meeting, reflects an abrupt shift. Early this month, Powell had told a Senate panel that the Fed was considering raising its rate by a substantial half-point. At the time, hiring and consumer spending had strengthened more than expected, and inflation data had been revised higher.

In its statement, the Fed included some language that indicated that its fight against inflation is still far from complete. It said that hiring is “running at a robust pace” and noted that “inflation remains elevated.” It removed the phrase, “inflation has eased somewhat,” which it had included in its statement in February.

The troubles that suddenly erupted in the banking sector two weeks ago likely led to the Fed’s decision Wednesday to impose a smaller rate hike. Some economists have cautioned that even a modest quarter-point rise in the Fed’s key rate, on top of its previous hikes, could imperil weaker banks whose nervous customers may decide to withdraw significant deposits.

Silicon Valley Bank and Signature Bank were both brought down, indirectly, by higher rates, which pummeled the value of the Treasurys and other bonds they owned. As anxious depositors withdrew their money en masse, the banks had to sell the bonds at a loss to pay the depositors. They were unable to raise enough cash to do so.

After the fall of the two banks, the Swiss bank Credit Suisse was taken over by its larger rival UBS last weekend. Another struggling bank, First Republic, has received large deposits from its rivals in a show of support, though its share price plunged Monday before stabilizing.

This is an update. The rest of AP’s earlier story follows below.

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Google's artificially intelligent 'Bard' set for next stage

Google's artificially intelligent 'Bard' set for next stage

Google announced Tuesday it’s allowing more people to interact with ” Bard,” the artificially intelligent chatbot the company is building to counter Microsoft’s early lead in a pivotal battleground of technology.

In Bard’s next stage, Google on Tuesday opened a waitlist to use its AI tool that is similar to the ChatGPT technology Microsoft deployed in its Bing search engine to much fanfare last month. Last week, Microsoft embedded more AI-powered technology in its word processing, spreadsheet and slide presentation programs with a new feature called Copilot.

Until now, Bard was available to only a small group of “trusted testers” hand-picked by Google. The Mountain View, California, company, which is owned by Alphabet Inc., isn’t saying how many people will be given access to Bard in the next step of the technology’s development. Initial applicants will be limited to the United States and the United Kingdom before Google offers Bard in more countries.

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Google Artificial Intelligence

The Google logo is displayed Nov. 1, 2018, at the company’s offices in Granary Square in London.

Google is treading carefully with the rollout of its AI tools, in part because it has more to lose if the technology spits out inaccurate information or takes its users down dark corridors. That’s because Google’s dominant search engine has become a de facto gateway to the internet for billions of people, raising the risk of a massive backlash that could tarnish its image and undercut its ad-driven business if the technology behaves badly.

Despite the technology’s pitfalls, Bard still offers “incredible benefits” such as “jumpstarting human productivity, creativity and curiosity,” Google said in a blog post that two of its vice presidents — Sissie Hsiao and Eli Collins — wrote with assistance from Bard.

As a precautionary measure, Google is limiting the amount of interaction that can occur between Bard and its users — a tactic Microsoft imposed with ChatGPT after media coverage detailed instances when the technology likened an Associated Press reporter to Hitler and tried to persuade a New York Times reporter to divorce his wife.

Google also is providing access to Bard through a separate site from its search engine, which serves as the foundation for the digital ads that generate most of its profits. In a tacit acknowledgement that Bard may be prone to straying into manufacturing falsehoods, which are being called “hallucinations” in technology circles, Google provides a query box connected to its search engine to make it easier for users to check the accuracy of information displayed by the AI.

Bard made an embarrassing blunder shortly after Google unveiled the tool by prominently displaying a wrong answer about a scientific milestone during a presentation that was supposed to show how smart the technology could be. The gaffe contributed to a nearly 8% drop in Alphabet’s stock in a single day, wiping out about $100 billion in shareholder wealth and underscoring how closely investors are watching how Google handles AI.

Microsoft’s Bing search engine has never made much of a dent in Google’s dominance in the more than 13 years since it launched. Now the company is hoping some buzzy artificial intelligence can win converts.

A president’s State of the Union address has a predictable formula. But what if a computer program were to write it? The Associated Press asked the ChatGPT bot to do just that.

The rapid emergence of the technology has also raised serious ethical questions, especially since it is being taken to market at a breakneck speed.

Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. This week’s episode starts with testing out ChatGPT’s ability to give financial advice.

The maker of ChatGPT is trying to curb its reputation as a freewheeling cheating machine with a new tool that can help teachers detect if a student or artificial intelligence wrote that homework.

ChatGPT, which was created to answer user questions in a conversational manner, has generated so much buzz that doctors and scientists are trying to determine what its limitations are — and what it could do for health and medicine.

A popular online chatbot powered by artificial intelligence is proving to be adept at creating disinformation and propaganda.

While good fun, I feel like my critic job is safe for now.

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