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