WalletHub founder offers warnings, advice with bleak report on credit card debt

(TND) — WalletHub Founder and CEO Odysseas Papadimitriou said Tuesday that he's not seeing anything positive about Americans' credit card debt in his company's latest report.

High debt levels, high interest rates and economic uncertainty at the least have the power to create “significant headwinds” for American households. At worst, they can be “catastrophic,” he said.

Credit card debt nationally has risen to $1.27 trillion, according to the WalletHub report.

That’s up 7% compared to a year ago and further into record territory.

The average credit card debt per household is over $10,000.

And with credit card interest rates around 23%, that “makes the debt feel much heavier.”

If there’s a silver lining, it’s that we’re 9% below the all-time high if adjusting for inflation.

But that’s of little comfort for Papadimitriou.

Credit card debt is still 4% higher than last year when accounting for inflation.

And he said it’s just a matter of time before we’re in inflation-adjusted record territory.

“We are 100% on track to get there,” he said.

Papadimitriou said there are encouraging signs here and there, and then the momentum stops.

WalletHub published a report last month showing Americans collectively paid down almost $50 billion in credit card debt during the first quarter of the year. And that was 8% more than a year ago.

But Papadimitriou is worried Americans’ progress toward reducing credit card debt is going to be wiped out soon.

Paydowns in the early going are typical, as are rising debts in the rest of the year, he said.

The WalletHub report pulls from the Federal Reserve consumer credit report that was released Monday afternoon, but they also incorporate inflation data and charge-off data.

A charge-off is when a bank writes delinquent debt off its books. But that doesn’t mean it carries no consequences. Collectors can still come after people, Papadimitriou said.

“I think the worst news is that whatever encouraging signs we saw in the beginning of the year, I think it's safe to say that they have, they seem to have evaporated,” Papadimitriou said.

There are other troubling signs.

The Federal Reserve Bank of New York’s latest report on household debt, which also includes things like mortgage balances and student loans, showed a new high of $17.69 trillion.

And Money Management International, one of the country's largest nonprofit credit counseling organizations, recently said they’re seeing an increase in young adults seeking its help. There’s been a nearly 200% increase in young adults seeking MMI’s services since 2019.

Papadimitriou said Americans should batten down the hatches to ensure they have the strength to withstand financial troubles – especially with the gathering storm clouds of record credit card debt.

“This is the time to go back to the basics, check the level of emergency savings that we have, cut down on unnecessary expenses, and plan for the future,” he said.