As the economy heads for a possible recession, further threatened by a debt ceiling standoff, Americans are losing confidence in the country’s business leaders, according to a new Gallup poll. (TND)Thumbnail
WASHINGTON (TND) —
Total household debt hit more than $17 trillion in the first quarter of this year, according to the Federal Reserve Bank of New York.
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Total household debt hit more than $17 trillion in the first quarter of this year, according to the Federal Reserve Bank of New York. (TND){{ }}
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Financial experts say they are not surprised that Americans have increased their debt in almost every category.
“This figure shouldn’t come as a shock, given that interest rates have nearly doubled in the last year,” said financial adviser Danielle Lucht.
The Federal Reserve Bank of New York report shows balances up $2.9 trillion from where they were at the end of 2019.
“To pay for my college education, I didn’t want to fall behind on loans, so I just started doing whatever I could on the side,” said Lauren Jack, who says she has more than one job to get over to make ends meet.
The report shows that Americans have increased their debt in nearly every category, including student loans, auto loans, mortgages and home equity lines of credit.
“In my professional opinion, I prefer home equity loans to home equity lines of credit,” Lucht said. “With a loan, you fix an interest rate for a period of time and pay back the principal and interest very quickly. With a home equity loan, you pay revolving interest every month.”
FILE – People pass the front of the New York Stock Exchange in New York, March 21, 2023. Wall Street stock prices are falling on Wednesday, April 5, and Treasury bond yields are falling following recent signals that the U.S. Economy bottom line slows weight significantly higher interest rates. (AP Photo/Peter Morgan, file)
As the Federal Reserve continues to hike rates, Lucht says the debt is costing Americans more every month.
While some are turning to credit cards, data for the first quarter shows that credit card balances were flat, but Lucht expects personal debt to rise.
“What we’ve seen with credit card debt so far is that with COVID you’ve seen some people taking their stimulus checks and actually paying off debt. “People weren’t able to spend money, so they either renovated their houses or paid off their debts. So we haven’t seen debt, really personal debt in the form of credit cards, increase over the years because of the impact of COVID.” She said, “We’re going to see personal debt increase again because of interest rates.”
Lucht told The National Desk if you’re looking for a place to invest your money, consider a high-yield savings account. She says the interest you earn could help offset some of the inflation.
If you don’t need the money for a year or so, a CD could be another option, Lucht says.
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