Household debt has been steadily increasing throughout the U.S. According to the Federal Reserve Bank of New York, debt has increased to over $16 trillion in the second quarter this year.
Kate Bulger, the Senior Director of Business Development for Money Management International, said spending habits and credit card usage over the pandemic is a one of the main causes.
She said in many cases, people used their credit card to bridge the gap between their income and expenses during the pandemic. Inflation and rising interest rates have made credit card debt even more common.
“People are absolutely terrified to talk about money,” Bulger said. “They would rather do almost anything else and the really sad thing is, that means people end up in a worse situation than they need to because they were too afraid to talk to someone about what they were going through.”
LISTEN TO: The U.S. household debt total continues to increase
Phil Schuman, Executive Director of Financial Wellness and Education and Senior Director of Financial Literacy at IU, said he sees this problem with students. He said while more students are mindful of debt, they are also more afraid of it and try to avoid it completely.
Schuman said it’s important that people understand it’s not borrowing that’s the issue, but rather over-borrowing or inefficient borrowing that is causing high levels of debt.
Clinical Professor for the Kelley School of Business at IU Greg Geisler said another cause for credit card debt is a lack of preparedness for emergencies.
“Start building up a Roth IRA instead of an emergency account because trust me you won’t touch that until an emergency shows up,” Geisler said.
Geisler, Schuman, and Bulger emphasized that more conversations and financial education should take place to help people avoid debt in the future.
