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Think the economy is stable? Think again. We're about to reveal the hidden dangers you need to be aware of.
Americans are currently facing a substantial financial challenge, with nearly $1 trillion in credit card debt. The cost of living has surged, with increased prices for essentials like groceries and gas. People are feeling the pinch due to inflation and high housing expenses. This has ushered in what is being considered the most severe credit crisis since the 2008 Great Recession. It is not only banks that are at risk; American consumers will also bear the brunt of these changes.

Lately, major banks have reported earnings, and they've declared that they'll no longer be lending at the same favorable rates as in recent years. Their approach to lending will become more cautious, with a critical eye on who they lend to, how much they lend, and the terms of the loans. The surge in bad loans and the decline of the commercial real estate market have put many financial institutions at risk of collapse. In response, these institutions are taking drastic measures to avoid even more significant losses in the coming months. Nevertheless, given the current outlook for debt delinquencies and defaults, especially as more consumers and businesses resort to credit, many of these institutions are on shaky ground and could face collapse before the year ends, according to the Federal Reserve of New York's analysts.

Remarkably, the credit card market is revealing its vulnerabilities as more Americans grapple with financial hardships. Credit cards are the most prevalent form of household debt and are expected to become even more widespread in the near future. Since 2019, over 70 million new credit card accounts have been opened in the U.S. In the second quarter, total credit card debt exceeded $1 trillion for the first time. Adding to the woes, interest rate hikes have outpaced consumers' income increases, worsening their financial health. As of the end of the fourth quarter, the average credit card interest rate hit a record high of 24.45%. Retail store cards, in particular, charge over 30%. This has pushed 22% of credit card users deeper into debt each month, as reported by Ted Rosman, an industry analyst for creditcards.com.

These findings are part of a troubling survey by The Firm. It notes that this year, Americans are using 30% of their take-home pay to cover credit card bills. Between January and September, U.S. cardholders paid $163.8 billion in credit card interest and fees, up from $120 billion in 2020. In essence, using credit cards has never been so costly. Financial advisors predict that it will get even pricier in the months ahead and into 2024.

Despite the challenges cardholders have faced in the past year, it's expected that the situation will deteriorate before improving. According to Matt Schulz, Chief Credit Analyst at Lending Tree, life is exceptionally expensive in 2023 and is unlikely to become more affordable anytime soon. He advises those looking to finance significant purchases to wait for improved conditions and lower interest rates. Federal Governor Michelle W. Bowman has also mentioned that more rate increases may be necessary to combat inflation and that the Federal Reserve expects an effective rate of 5.1% by the end of 2024, making obtaining loans more difficult for most people. This is the american middle class crisis.

For those already struggling to manage credit card payments or other loans, Eric Croak, a certified financial planner and president of Croak Capital, recommends focusing on paying down high-interest debt instead of taking on more debt in 2024. Unfortunately, many credit card holders have already found themselves in a precarious financial situation. Less than half of Americans believe they'll be able to pay off all their credit card debt within the next year. This means we are in a crisis of credit.

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