Historically, credit card debt carries a higher interest rate than secured loans such as mortgages or car loans. However, the rates being charged for most credit cards now outstrip past experience, even as gasoline, rent, and fuel prices continue to crush the living standards of millions of Americans. These inflationary pressures are regressive and disproportionately impact low-income Americans. But nosebleed interest rates on credit cards are exponentially more burdensome than core inflation, as these are heavily skewed against people with low incomes. Bidenomics has brought persistent inflation, heavily affecting America’s most vulnerable.
Credit Card Rates Spike
It is logical that companies charge more for higher-risk debt, especially unsecured consumer lending, where default rates increase. But the degree of that spread and the speed with which rates have risen threaten to drown already struggling consumers. Companies are increasingly charging fees on top of interest charges, also disproportionately impacting poorer consumers who cannot avoid them. Rising credit card rates bode ill for future purchases and act as a retroactive drag on past expenditures – consumers must pay more and more in interest for stuff they bought last year, for which they still carry a balance.
Consumer spending and demand are the core engine of the American economy. Current spending remains robust, in part infused by a sort of escapist nihilism from a world roiling with disruption and conflict. Binge shopping, like binge eating, is comforting in times of anxiety, providing consumers with a sense of control. Spending may also be driven by an awareness that rising prices make today’s purchases wise even when leveraged. It may be that, on an intuitive level, consumers understand the fiat American currency is shriveling.
Bidenomics in Action
For most consumers, the increasing debt, fees, and interest payments they shoulder are simply unavoidable. Rampant spending by President Joe Biden’s administration has been enabled by a reckless monetary policy that is essentially monetized debt: a money-printing machine funding pork projects at the expense of real economic investment. The International Monetary Fund (IMF) recently warned that escalating debt levels are threatening global economic stability, with US fiscal health described as the “most worrying” in the world. This is Bidenomics, unfolding in real time.
FY 2023’s deficit of $1.7 trillion represents a 23% increase in the nation’s debt over the previous year: servicing the existing national debt for one year cost $879 billion. It is not just the IMF that warns this spending is unsustainable: It is anyone who can do arithmetic.
Americans can do the math when their credit card statements arrive in the mail. They also see rising housing and rent prices, food inflation that hits where they can least resist, and inflationary pressures impacting other necessities. Gasoline prices were $2.18 in October 2020; the national average is now $3.55, a 63% spike in three years. Heating oil that was $2.13 in October 2020 has now more than doubled to $4.51. And winter looms – the winter before the 2024 election season.
War and Climate Change Spending
Much of the Biden debt leap has been war-driven and presumably will increase as POTUS links military aid for Israel with even more funding for Ukraine. A sizable portion of new spending has been allocated to climate change projects that threaten to destabilize the currency and the American economy. This will not serve the environment any better than American voters struggling to survive: Desperate people don’t care about carbon dioxide emissions when their kids are hungry and freezing.
Launching a so-called “progressive” ideological push for social and climate justice, the Biden cabal has unleashed a regressive assault on low-income Americans. Prominent in this is credit card interest rates. In February 2022, the prime rate stood at 3.25%, and the average assessed interest rate on accounts was 16.17%. By August 2023, the prime rate had risen to 8.5%, and the average assessed interest rate was 22.77%. A base rate increase of 5.25 percentage points impacted credit card rates by 6.6 points. Forbes reports the average credit card interest rate is now 28.15%. That’s a lot of vig*!
However, these blended rates explain only part of the picture. Americans with strong credit and better finances pay lower interest rates and fees for credit. Those with a credit score above 740 likely pay 16-18% interest; subprime markets (those with credit scores between 580-669) face rates of 22-24%. Deep subprime borrowers are hit with rates above 24%. The credit score is a harbinger of the US social credit system likely to come, linked electronically to bank records and the internet. This is wealth disparity in action.
Whether this deconstruction of the American economy and vulnerable working class is deliberate or merely incompetent is immaterial to the very material suffering inflicted. Interest rates for credit cards and other debt will continue to drain the wealth of working-class citizens, as will rising food and energy prices. Europe is imploding under unsustainable energy costs fueled by Bidenomics and anti-energy policies. America is close behind.
Runaway federal spending shows no more sign of slowing than ballooning consumer credit card debt. Americans had best hunker down for a long winter: Prices are not coming down anytime soon. Consumers preparing to vote in 2024 may be forgiven for wondering whether some of the borrowed money being spent to cool the planet might be better invested to warm their homes and cool down inflation.
*Short for vigorish, an excessive rate of interest on a loan, typically one from an illegal moneylender.