Host just this past week of the Federal Reserve bank of new york reported americans are now 1 trillion in Credit Card Debt. To help us understand that and what it might mean for the broader economy, we are joined by matt schultz, chief credit analyst with lending tree. Com. Tell us about lending tree. What does your company do . Guest lending tree is an online marketplace where you can go and search for reddit card loans, auto loans, personal loans, mortgages. We are not a lender. We are a middleman to help people find the best prices on loans and compare rates, but we also have an Editorial Team that creates a lot of great content to help people make smart decisions about their money, and what to do when they have acquired credit. Host you said you are more of a broker, a guide for folks shopping for credit cards, for loans. What is lending trees relationship with the Credit Card Companies . Guest lending tree on the business side collects a bounty for every person who successfully applies for a credit card through our site. In my role, we have editorial independence in terms of what we put out there. As somebody who spent most of my professional career in journalism, the relationship between our Editorial Team and my role at lending tree is very similar to the role of an Editorial Team in any tv station or newspaper as it relates to their Business Program as well. We keep a pretty good divide there. Host your role is chief credit analyst. We mentioned the report from the new york fed on household that. You have seen this coming. Household debt. You have seen this coming. Matt schultz, have you been seeing this rise to 1 trillion coming . What is causing all that Credit Card Debt . Guest there is never only one reason why Credit Card Debt rises, but unfortunately rising Credit Card Debts is a default state for the american consumer. The only time we have seen significant decreases since the fed has been tracking these numbers for decades is in times of economic catastrophe. We saw a drop saw it drop at the onset of the great recession. We sought it drop at the beginning of the pandemic recession. Beyond that we only see Credit Card Debt rise. What a lot of people do not recognize is that it is not just people who are struggling at lower income levels who have Credit Card Debt. Wealthy people, high income people, people with good Credit Scores have it as well. It is often times a matter of how they use that credit card, and the role it fulfills in their financial life. Host the rise in Credit Card Debt means the ability of people to pay is declining. Tell us more about that. Why is the ability to pay such an important factor here . Guest job number one for anyone with a credit card is to pay that bill off as soon as they possibly can, ideally when that bill comes at the end of the month, because if you pay that credit card bill off at the end of the month in most cases you will not have to pay any interest. Then it becomes a good, shortterm, loan you can use lowcost and it can be a very useful tool. Where gets very dangerous is if you keep spending, and you run up debts that you cannot pay off at the end of the month. That is when those Interest Rates kick in. Right now the, average Interest Rate that someone who is carrying a balance from month to month pays is a little over 22 , according to the fed. That is the highest it has been. They have been tracking these numbers since the early 90s. Host has that credit card Interest Rate also tracked the rise in Interest Rates from the Federal Reserve . Guest generally speaking, yeah. The average Interest Rate for new credit card offers is about 24 , and that has risen much in lockstep with the fed. Interest rates for folks who are carrying a balance from month to month so a slightly Different Number there has risen a little bit faster than what the fed has done, but generally speaking, especially for the last 10, 15 years, generally credit card rates have tended to move as the fed moves, and otherwise been fairly stable. Host matt schultz is our guest. He is chief credit analyst with lending tree. We welcome your calls and comments on the issues. 202 7488000 is the line for those of you in the eastern and central time zones. It is 202 7488001 mountain and pacific. We are talking about credit card Consumer Debt with matt schultz. The way we live today, it is a castellanos society. You go to so many a castel e ss society. You are using your credit card for everything, even a coffee. Guest the Cashless Society is overstated. Generally the trend is towards more credit card use, especially we have all run into a coffee shop or any other sort of small retailer and had one of those machines where you tap or swipe or insert your card. And seen that tip mechanism pop up. Often times the options ucr 22 and 25 person options you see are 20 , 22 and, 25 and you have to go out of your way to tip less. We have seen more credit card use. Credit cards do make it easier for you to spend, and they are a tools that requires a lot of discipline. If you are disciplined with it, it can be a lucrative thing because of rewards and things like that, but if you are not it can cause you some trouble. Host you were quoted in a piece in cnbcs your money column. You said in this article a huge test is coming for cardholders, tying the cento Student Loans. Tell us what you mean by that huge test. What will it be and when is it . Guest it is coming later when student loan payments resume for many people in this country. It will be a really big deal. By and large most americans financial margin for error is pretty tiny. That is true even during this student loan payment pause. The introduction the reintroduction of those payments into peoples budgets will force people to reprioritize some of their spending. And that money that now has to go back to paying that student loan bill off will be money that cannot go towards paying Credit Card Debt off, to your Emergency Fund, your retirement, your college fund. It is going to be a real challenge. We do not know exactly what it will look like, but for a whole lot of people in this country it will be a real challenge. Host how has inflation benefactor in inflating Credit Card Debt . Guest it has been a really big deal. Life is really expensive in 2023. Most people do not have a lot of wiggle room financially. As the cost of things has risen over the past year and a half, 2 years it has really squeezed peoples budgets to wear that little bit of wiggle room they had may not be to where that little bit of wiggle room they had may not be there anymore. It means that for some people, if they are not able to put money away to save, it may mean they look at a credit card as a de facto Emergency Fund and end up running up debts if they have to take their dog to the vet or if they have to get a car repair or other kind of lifehappens things like that. It has played a huge role. Host i saw a statistic that more than one third of americans have more Credit Card Debt than they have emergency savings. Guest really, savings is the key to the whole thing. Heaven knows, there have not been a whole lot of positives for the consumer about the Interest Rates rising so consistently for the past year plus, but one of the positives is savings accounts are now yielding a whole lot more than they have been years, so for people who can put a little bit of money away, that money is going to be working harder for them than it has in a while. That is such a big piece. I get asked a bunch of times whether people should focus on savings are knocking down debt, and the answer is they should do both, because if you do not have any savings when that credit card bill gets down to zero, all that happens is that next unexpected expense goes back on that credit card and the cycle of debt keeps spinning. If you have some savings put away that you can handle a little bit of a surprise cost, then die can make a whole bunch of difference and make it to where may be that next big expense does not have to go on your credit card. Host how many and what is the average how Many Americans have Credit Card Debt . What is the average monthly balance that they hold . Guest generally, a little over half of people with credit cards carry a balance from month to month. The average balance, depending on the source that you look at, is around 7,000. That is a lot of money. It is not a lot of money compared to what a lot of people owe on their car loan, their student loan, but it is real money, and it is usually the highest interest debt. That means even if it might be smaller than some other debts you have, it has the most potential to grow, so it is important that you address it. Host we have calls waiting for matt schultz, chief credit analyst for lending tree. Com. Earl is up in detroit, michigan. Caller i noticed some things even about credit reporting agencies that i would like you to address, if you can too. With the credit reporting agencies, the way you get a socalled good score, was to leave cards open. Back in the day if you paid a card off and closed it, then you go then your credit score went up. It is like they encourage you to leave cards open, knowing people are not disciplined really and will use that open limit. They want to leave the limit open. That is how your credit card score goes up. That to me is a scam. You no longer get an increase for paying off cards. They dont even advertiseno more advertise no more come to our company, we have lower rates. It is all about gimmicks. The credit reporting industry, they are part of the problem. Host we will hear from our guest. Guest one thing that is important to understand, and i know a lot of people get frustrated with credit reporting, but one thing that is important to understand is that the consumer is not the primary customer for credit euros and credit scoring Credit Bureaus and credit scoring companies. They are primary customers are the lenders, and their job is to show the lenders who are risky borrowers and who are not. That is what the whole system is built around. It is frustrating for a lot of people because they do see when they have finished paying off a car loan or student loan where there score may drop their score may drop a little bit. That is hard to understand, but generally speaking, what we are seeing over the past 5 years and a little bit before that the industry and that is the industry trying to take in more data points to where people can more Different Things can help people improve their credit, things like experience boost which allows you to connect your bank account so they can see utility bills, cell phone bills and things like that. There are companies who can facilitate rent payments being sent to the Credit Bureaus. I understand the frustration. It is not a perfect system. I dont think anyone will debate that. The good news is there are things being done to try to expand Credit Access to people and to have a lot of the things that people do on a regular basis, and a lot of the bills they pay on a regular basis that are not factored in to have that help people. That is a positive thing. Host next step is homer in north carolina. Caller how are you doing . I am a citibank retiree. Thi right now they are using the steam of low interest for 12 months so people can build up debt. The banks are pushing the issue themselves. They are hitting them with as much as 20 points over the Federal Reserve discount rate. That is one reason this has increased the way it has. Guest there is no question that Interest Rates are as high as they have been. It is interesting he talks about 0 offers, and those are still widely available. Those are one of those things that early 2022 when the fed started raising rates, there were questions about whether those would stay around because banks make less money if they are giving 0 cards when the rates they are paying go up. What we have seen is that those rates, though 0 offers, both typically on Balance Transfers but sometimes on purchases as well have stuck around in part because they are very popular with consumers and like a lot of financial tools, if you handle it well, it can save you a lot of money, but the other side is correct too. Banks love that as well, because it is a way to get customers in the door. It is a lead generator. If they make the right offer, they get you as a customer, and then you have a good results from that credit card, you are more likely to stick around. The longer you stick around , the more likely the bank is to make money off of you. Though 0 cards are not going anywhere anytime soon. Host were are talking about Credit Card Debt, particularly the 1 trillion reported by the Federal Reserve of new york. Our guest is matt schultz. We will go to richard calling from nashville. Caller let me give you a real thing, what i did. I have used a credit card and saved a lot of money, but i have 0 . My mama always told me, keep your credit clean and dont ever use it until you have to. I have done that for 67 years. I have a paid off mortgage. I bought my house for 30,000, and it is worth over 400,000 now. I have always gotten 0 , even on car loans. This time around i got a 3. 49 interest at toyota. My Credit Rating is 840. I have raised a daughter, paid off a mortgage, paid off high school bills on 30,000 a year. I t can be done a year. It can be done. I got 0 for 15 to 18 months, and then i would pay it off every month, and if i could not pay it off i had zero interest. You should not use your own money, if you can be disciplined enough to pay it off. All these hairdos, naildos, the rooster will come home to roost. Your wife cannot take care of your business. You have to do this. Pay off your debt as it comes. Try not to have any debt. It does not matter how much money you make in this world. Guest it sounds host richard, it sounds like you could write the book on it. Thank you for your advice. Guest there are plenty of examples like him of people who have used Balance Transfer cars to save themselves some money cards to save themselves some money. They can be great. Credit cards are like a lot of financial tools. If they are used wisely, they can be really lucrative, but if you dont, it can cause a lot of trouble. One thing i will say about it card debt as a whole, there is never one reason. It can be about confidence or it can be about struggle. We think about it primarily as being about struggle where people run up Credit Card Debt because they have to, because they dont have any choice. The other option would be payday loans have any choice. The other option would be payday loans. Credit cards are about confidence. People may be able to get access to that credit and might feel good enough about their financial situation to use that card to remodel the house or get a new wardrobe before they start a new job, or help their kid get off to college with some new home decorations. There is always a balance between confidence and struggle when it comes to rising Credit Card Debt. I what imagine that today that struggle side is rising a little bit for sure, but we cannot discount the fact that some people are using Credit Card Debt as a tool because they can and less because they absolutely have to. Host if one is going out to get their very first credit card, or getting a new credit card, searching a lower Interest Rate, what are the fine point details they should look for . Where should they look for information on monthly Interest Rates, for example . What are the important things they should know . Guest one of the good things about applying for credit cards at a site like lending tree or a lender website is that there are certain disclosures that need to be made up front. At least broad disclosures that have to be done up front when you apply. What those include are things like the overall Interest Rate on the card. You will not find out your specific one until you apply but issuers are required to provide a range of potential Interest Rates so that can at least give you a ballpark idea, but things like annual fees, Balance Transfer fees, foreign transaction fees, a lot of that has to be spelled out in a big, bold print box that you can generally find on your card issuers website or on a site like lending tree under a link that says pricing and terms, r terms and conditions. A lot of that information is there and that is really important stuff, especially depending on how you use the card, if you are somebody who is just trying to get rewards, it is one thing but if you are somebody trying to pay down debt, or extend that budget a little bit, that data gets even more important. Host lets hear from alan in rhineland, wisconsin. Caller i, want to point out you mentioned Student Loans, Student Loans surpassed Credit Card Debt in 2010. That was 13 years ago at this point. In the meantime, since 13 years ago Student Loans have screamed up but for the repayment pause during covid, we would be well over 2 trillion at this point. Credit card debt has risen quite modestly, only 200 billion since 2010. I have a question unlike all other loans in this country including credit cards, Student Loans are nondischargeable in bankruptcy, and 90 of that debt now is owed directly to the federal government. How wise is it for people to start throwing their student loan payments on a credit card . What is your opinion on this whole thing . What is this student loan nonsense where 100 billion of interest every year is accruing to the federal government, and now we are looking to the private credit industry to lend people money to shovel to the department of education . My real question is do you think Student Loans should be treated the same way as all other loans in this country in bankruptcy proceedings . Guest yeah, it is an interesting question, and it is certainly something that people need to understand before they apply. My son is going to be a seniorin High School Senior in high school here in austin, and it is something first and foremost in our mind, the cost of Student Loans. It is important to understand that a a lot of times bankruptcy is important with student impossible with Student Loans. That is one of the things you need to factor in when you are looking at where you want to send your kid to college or where you want to go to college yourself. One thing i will say myself is it can be possible to Pay College Tuition with a credit card. A a lot of people are like if i can pay it off then maybe if i pay with a credit card i can get a bunch of rewards points and fly off to paris with those rewards, which i would already be paying for anyway. Problem with that is it is th at is often times there are fees associated with paying College Tuition with a credit card that outweigh any rewards you would get from the credit card, while there is the risk that if something were to happen, you had a financial emergency, and you are stuck with all of that debt on your credit card. Host the fight over a bill targeting credit card fees pits Credit Card Companies against retailers. What can you tell us about the credit card competition act . Guest there has been a battle going between Credit Card Networks and banks and retailers for an awful long time. Merchants basically have to pay what are called slight fees to banks and Credit Card Networks in order to accept credit cards at their business. Right now, for most places, the idea of not being able to accept credit cards would just be a nonstarter. It would be a business killer. It is one of those costs merchants have to adapt to. What the credit card competition act does, and it is a bipartisan bill sponsored in part by illinois senator dick durbin who has been involved in credit card legislation in the past going back to dodd frank around the great recession, but what this essentially tries to do is insert a little more competition into the Credit Card Network space. What essentially what happened is for all card issuers above 100 billion in assets, so the top 30 or so card issuers in this country, they would have to on that credit card, they would have to include more than one Credit Card Network they would have to include more than one Credit Card Network. This gets a little wonky, but what a Credit Card Network is, is american, mastercard, discover, visa. They laid the rails a facilitatend rails and facilitate the use of credit cards. Visa and mastercard dominate that space. Most cards in this country will have a visa, mastercard, american express, or discover logo on them. This bill would require instead of just one of those Companies Logos you would have to have more than one generally speaking. Instead of having a chase visa card, you might have a chase credit card that has visa and discover on it, and that would be a significant switch for merchants in banks and networks, not as much for consumers as far as the transaction goes, but it would still be a pretty big deal. Host lets go to california and hear from ruth. Caller good morning. I have a question and a comment. My question is my bank has the experian thing somehow built into it. I get offers from experian all the time. It is preapproved and the fine print says maybe not for this, that, and the other. They know exactly what my balances are. They will say, they will offer me a bunch of choices, but i like the Balance Transfer 0 , right . A couple of times i applied, and when they did end up rejecting me, they lowered my credit score. I wonder why does that have to happen just because you applied, especially when somebody like experian who knows who you are, they know my balances offers me something they think i am likely to be accepted for, why do i have to be why does my credit have to be degraded because i get turned down . The second is a cautionary tale. I took out a loan from lending tree a while back, and i paid off my credit card totally. I was slammed immediately by a whole bunch of scammers and hackers, and this and that. I learned that if i do get some amount of money to just feed it into the credit card slowly. If you pay it off, somebody notices right away. That is my question and comment. Host matt schultz. Guest a couple of things one, generally regardless of who you are or whether you are successful applying for a loan or not, your credit score will usually have a small, temporary ding when you apply for credit. The short answer is it is another potential risk that if you get this new card and run it up, it could make you a little more of a risky person. That is something small, but generally speaking that movement is not enough to have a Significant Impact on your credit score. Nor does it last very long. That is the important thing to understand. The other thing to understand is that with credit, credit is very important. There are times when you just, you need to do what you need to do. The idea about paying or keeping a credit card balance or that sort of thing in order to help your credit is a troubling thing. Ultimately, with these loans, the last thing you want to do is pay on them longer then you need to and pay more than you need to, so regardless of whether it may ding your credit a little bit, the most important thing for you is to get that credit card balance off of your budget to where you can start saving that money, instead of putting it towards debt. Host lets hear from drake calling in kirwans bill, pennsylvania calling from pennsylvania. Caller my question i really have two questions. One is if you have a credit card and debit card, and you have cash available, is it better to put it on a credit card or a debit card . My second question is credit cards are basically unsecured debt. What happens if a person dies . Is that debt payable . Guest yeah. Essentially, with a credit card some of it is just up to your personal preference. I know a lot of people just dont want to use a credit card because of the debt, and that is completely understandable. In a lot of ways using a credit card is a wiser choice over using a debit card, assuming that you have the money to pay that credit card off. The credit card comes with protections such as if you order something through amazon and it comes through broken, you can go to your credit card issuer and have them handle that purchase, and often wipe that cost away. It can build rewards and things like that. Security is another issue where if a bad guy gets a hold of your credit card and runs up a bunch of charges, usually it is just a phone call that you need to make sure report that, and those charges get wiped away. If someone gets a hold of your debit card, that is a whole other thing because that is real money coming out of a real account. That money will likely be replaced within a few days, but during that window where that cash is gone i can that can cause some issues. Host this is a philosophical question from jimbo in california does mr. Schulz reasoned that americans do not view owning 1 trillion of Credit Card Debt as an issue because the government has so much debt . Guest it is interesting. That is a whole other discussion that i tend not to get into. The truth is Credit Card Debt is a difficult thing. I myself, i had 10,000 in Credit Card Debt and a new car loan when i was in my mid20s, and it basically wrecked my life for about five years. I flipped it around on the others and now leverage rewards and cashback and all that sort of thing. I understand. I have been there. It is a difficult thing. The other thing that is hard. The other thing that is hard is while that credit card number is at 1 trillion, some of that 1 trillion is an amount that is being paid off every month, and some of that is being carried forward. Generally speaking as wild as it sounds people have generally been handling their payments well since the onset of the pandemic when a lot of people thought that this situation was not going to be now what it is financially. Delinquencies are rising but, they are still basically low historically. The amount of Credit Card Debt that we have is still relatively low compared to our expendable income broadly. That is certainly not the case for everybody. It is a difficult situation, and an awful lot of people are struggling, and student loan repayments are going to mean that a lot more people are struggling, but right now it is something that amazingly enough, people seem to be handling as well as you can help. Host a couple more quick calls for you. We go to angela first in massachusetts. Caller good morning, and thank you, mr. Schultz. I love this segment. I think it is very appropriate for this time of year. I am trying to get my debt down. I have a large debt. At the shop when he gave me the bill, i thought 193, but on the little slip that was attached there was a 10 fee on my discover card. I was thinking what was that . Should i ask first before i go in there if they charge a fee if i put something on my credit card . Guest yeah, generally that is a good idea. A a lot of times a business will post something at the checkout counter that says that, but if that is a concern of yours, that is something that you should ask. It is not unheard of and going back to what we were talking about with the credit card competition act, credit cards are a serious expense for businesses. It is generally between 1. 5 and 3. 5 percent of each transaction that retailers have to pay to be able to accept credit cards, but as small as the margin is for most businesses, profit margin i mean, that is a significant thing. I think you may seeing more businesses adding on that surcharge. If you are concerned about it, it is worth asking if that is the case. Host lets hear from eric in new york. Caller good morning, cspan and matt. I am a little bit confused. I heard about wealth transfers from the greatest generation. I just pulled up an article in fortune boomers great wealth transfer to millennials will come with some strings attached. I hear about a student death and so for student debt and so forth. Are the demographics divided in such a way are parents is sitting on all of this money watching their children twist in the wind with tripling student debt . That sort of thing. Are parents doing it, but there w ar some who dont have but they dont have the money to help their children struggling with student debt . Guest the short answer is that every family is different, and every family struggles in different ways financially. Generally, Student Loan Debt is a significant issue in this country, and when those repayments start it will get a whole lot harder for people to make their credit card payments. That will make a tough situation even tougher. Host thank you for