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communications supports c-span as a public service along with these other television providers giving you a front row seat to democracy. host: welcome back joining us this morning is ted rosman. ted rossman senior industry analysts for bankrate.com here to talk about credit card debt. take a look at this headline come americans continue to pile up credit card debt edging close to $1 trillion. should that figure scare us? guest: it is one of these all news is local issues. do you carry a credit card balanced or not -- balance or not? these figures in credit card balances do not ditch diggers between what is not -- do not distinguish between what is paid in full and not.

those who pay in full get rewards and are not paying interest. credit cards are working for them. the other have, 46% are carrying balances and that average interest rate is a record high, 22.5%. that is a tremendous difference. the rewards are not working for them. that can become a persistent debt cycle. there are economic benefits to spending certainly. so much economic growth is powered by consumer spending and i think the cars balances reflect that but he did not want to carry a balanced if you can avoid it. host: the 46% carrying a balance, how does it compare to recent years? guest: it is up. when year ago 39% of carry -- to cardholders carried debt from month-to-month. balances are going up.

there's a time that credit card balance was filled from the pre-pandemic peak. q4 2019 to q1 22 the one we saw a 17% drop. since then balance how shut up about 30% -- shot up about 30%. people would take advantage of the fact there is spending less early in the pandemic. right now we see warning signs in terms of more people carrying more debt and at record high interest rates. the fed rate hikes over the past year and a quarter have push the typical credit card rate of about five percentage points per year that is a big deal. host: why the banks charging? guest: the average is 22.5% of

the some people are paying 25% or even in the neighborhood of 30%. if you have a lower credit score you might be in that 30% threshold. a lot of store credit cards they added that high-end as well. because they are not as selective as about credit quality. even a low rage credit card these days is often in the low double digits. this is people's priciest debt which makes it important to come up with a payoff strategy. host: we want to hear from our viewers on that very issue. this is how we divide the lines this morning. if you have credit card debt dial in at 202-748-8000. if you pay off your credit card monthly, 202-748-8001. if you do not own a credit card now in this morning at 202-748-8002. what is your prediction of how many calls you think we get a

people who do not own a credit card? guest: we know about four out of five americans have credit cards. there is roughly 20% that is not have one for one reason or another. and be personal preference. may be access to credit but increasingly credit cards are huge parts of the economy. they drive a lot of consumer spending. traditionally we have seen credit cards for more discretionary purchases like travel and dining. that is changing. because of technology and people using less cash, fewer checks. some is out of necessity and more people financing gas and groceries and other everyday essentials with inflation being so high. host: if you go back to the headline about the federal reserve report, that is nearing $1 trillion americans have in credit card debt. is this an economic bubble that could burst? guest: from a credit quality

standpoint i'm not worried right now because people -- because even though the have gone up from pandemic close, that was artificially low to begin with with all the stimulus that was out there and people were to cut up and not all spending on things. we are still below pre-pandemic norms. it is a relatively calm risk environment for lenders right now. people are paying these bills back for the most part. increasing numbers carrying balances which are worsening from interest in point but credit still flowing freely. the vast majority paying their bills back on time. the stronger job market deserves a lot of credit for that. we have on unemployment rate below 4%. often time that predicts the default rate on credit card. it is still pretty low. host: this headline in business

section of new york times, global battle to reign in prices. countries walking a tight rope as they raise interest rates to control inflation. if they fail, destabilizing period could result. what is the effect of this on credit card debt? guest: i think the job market is a big indicator there. maybe it is a more lagging indicator because typically it takes something sizable to up and the normal trend of credit card balances going up and credit card issue is reviewed at last year it was a record year for credit card originations by the way. the speaks of the trend of more consumer spending and low delinquencies and issuers being quite comfortable issuing cards. we see unemployment like the pandemic, that was a special case with the stimulus, may be a

better example would be the great recession of 2007 between 2009. the majority of that is close ranks a bit and legacies and charge-offs go up. balances went down because less access to credit but also people making pay off a priority during uncertain economic times. in general, credit card debt and issuance on it are steady march upward. that is not necessarily a bad thing because it does say something positive about consumer spending and overall economy. the big distinction is the household level we want you to be among those who are using cards for convenience and rewards but not as an expense financing tool. host: ted rossman is our guest an analyst with the bankrate.com. tosha in michigan, europe first. you pay off your credit card every month?

caller: i do. thank goodness. what is very appalling to me is the rate they charge people for the ability to use a credit card. when i occasionally get a statement and it shows 22% i think that is -- we should not be charging those people that kind of money. when i go to cosco, i'm amazed at how many people shop there. it is great store but costco makes money on the memberships. if you cannot afford the membership, i guess you cannot shop there. the regular charge -- i also think about she's going back to school and parents that have new

clothes, new shoes, new everything. most parents cannot afford to pay that all at one time. and so, they spread it out as best they can but the bills come in every month in addition to those. host: let's pick up on what you said about that interest rate that credit card companies charging between 90% and 25% --19% and 25%. any effort about legislators or the federal government to cap how much a credit card can charge? guest: there was a supreme court case some years back that declared it matters where the card issuers not the customer because even at the state has a certain interest rate cap credit cards are basically enforced based upon the state where they are base. it is where they are set up in

states that do not have an interest rate cap or very high one. there has been an effort in recent years -- a few years back senator bernie sanders and representative alexandria because you'll cortez unveiled with cap raise it is about 17 percent, charge credit using are capped at 18% by law. i do not see any movement on the near term horizon in terms of a true cap. i would argue 70% is quite high relative to other -- 17% is quite high relative to others. typical car loan is about 7%. initially response would be credit cards are an amazing thing. this unsecured debt. no underlying asset on the line. you can use it just about anywhere.

they give you a credit line. it is flexible. a lot of it is only consumer to paid off in full. that is when credit cards work for you when you are able to pay in full, earn rewards, and avoid these high interest rates. host: we have not talked about late fees. what are they? how much to credit card companies charge? guest: this is one in the news lately. currently working on this -- the current cap for credit currently fees is $30 for the first events and then 41 for subsequent offenses within six billing cycles. cfpb as part of the broader push against fees is trying to bring that down to eight dollars. the industry is pushing back. they reportedly make about $12 billion a year in late fees and this would chop about three quarters off of that.

some say late fees are an important enforcement tool, a deterrent for not paying late. other say the cause is really disproportionate to the value received. this is called up in brother -- broader discussion about wholesale resort fees and airline seat selection fees and all of these junk fees. we will see how it plays out but there is a suppose cap of just eight dollars down from $30. host: the chair wrote testifying on capitol hill about this and he got pushed back from members of congress. [video clip] >> these are fees that the user agree to where they took the credit card because the fees the recoup cost, but there also designed to be slightly pensive to stop that behavior -- punitive to stop bad behavior.

you're proposing taking away that given the punitive charge to those who are obeying the contract or agreement made with the credit card company. >> i just want to make sure something is clear. reasonable is not the cfpb word. that is what is in statue. >> do they not agree to whatever fee structure it was when they agreed to take the credit card? >> that is true but the reasonable proportional as a separate prohibition so again, one of the things that is in their is institutions can certainly be able to show why there is reasonable -- we propose a framework. >> why are you going this direction? >> what we have found across consumer credit markets is we do not -- it is not a compare competitive market when an institution has an incentive for

someone to default or be late. we learned the hard way about this with subprime mortgages were originator could benefit even if the borrower defaulted. most credit card companies, especially small ones, do not have the business model and in our review is that they do not actually build a business model or profit more when someone is late. in some cases a borrower might be a day late or a few dollars off and get a very large fee. that is what congress was thinking to prohibit and we want to market -- a market where credit must the person -- host: the chair of the consumer financial protection bureau. this morning we are talking about credit card debt. ted rossman is our guest with bankrate.com. cardio in southwest fall, new york. pace off the credit card every month. welcome to the conversation. caller: hi.

you do a great job. the place i would like to make our i find the credit card our class and that is another advantage where the weather folks again at advantage. i run a small business. i run all my bills through my credit cards and i get a bunch of rewards and by paying it off every month i do not pay interest on it. you do not pay interest if you pay it off in his entirety but i can get airline travel rewards and vacation are wars and all kinds of stuff. the poor person who may miss a payment and does not do this, they are paying higher interest rate to support it might reward. we all know this business to make money. host: let's take that theory. go ahead. guest: i do hear that there is some times that are basically

the poor are subsidizing the credit card rewards of the rich. i do not know if i fully buy into it it because i would note supposedly high percentage of higher income households still carry credit card debt. there could be lower income households that do not have credit card debt due benefit from rewards. is he sense, it is more about how you manage your money, not necessarily how much money you have. it has been in the news that with the credit card competition act, legislation that would open up more competition and credit card network space which of the face of it sounds like a good thing, but at the end of the day could save marches money but it costs us credit card rewards. at the revenue stream comes down, banks will make it up elsewhere in my cut back on rewards and could be regressive. america has the most lucrative credit card reward market in the

world. there is no evidence retailers with lower prices these rates were lower. debit card rates were cap more than 10 years ago and the federal reserve found 1% of retailers lowered prices. regardless of what your income is, it is important to be among those who are paying in full every month. i do not see it as much of a income thing but a good practice that can have credit card working for you rather than against you. host: eliza in ohio. do not on a credit card. how come? eliza, good morning. i will move onto emily in massachusetts. you do not on the credit card. caller: i do not own or now. i paid them off. i was looking because i got an inheritance as able to pay them all out.

i have been paying them for years but to think i do not understand and i do not know, i know it is unsecured debt by do not understand how -- but i do not understand if you do not have the money to make the payment, and the added fees, what are you going to have the money when they put on these fees and it is going to make you pay it? it is more money and you do not have the money in the first place. host: ted rossman? guest: late fees are on there as a deterrent but what we are getting at is this idea that it is not like a mortgage where they can foreclose upon your house or a car loan with a can repossess the car. credit card rates are high because it is unsecured debt. they're worried about people skipping out on these charges.

that is really the biggest reason why credit card rates are high. they pushed higher because of the fed rate hikes which have been well-intentioned. to fight inflation by have had a big effect in credit card balance because almost all credit cards are variable. a typical formula is the prime rate 8.25%, it was 3.25 percent early last year. the prime rate plus whatever the profit margin is typically averages about 12%. this is a structure that became common after the card i went to effect in 2010 -- the card act went to fight in 2000 10. the consequences of having tighter control of when and how credit card issuers can raise rates has made them read to sensitive to a rising rate environment and it is the first time the fed has been pushing rates up. it is made rates --

host: here's how we divided the line. if you have credit card debt doubt in at 202-748-8000. if you pay off that credit card monthly, 202-748-8001. if you do not own a credit card, 202-748-8002. call in -- collin in silver springs, maryland. why do you pay off the credit card every month? caller: i'm in my 40's now. when i was in my only 30's i got in trouble with credit cards. i took a lot of risk. i had to get charged off and it hurt my credit for a number of years. i have five credit cards and pay off every month and use them for different purposes to get rewards, usually cashback. i keep as much cash as possible every month in height and just make account with no policy for moving the money. i use the credit card company to make more money and try to

reduce inflation. that is a good thing if you use it wisely. host: can you respond to that, ted rossman? guest: i love the idea of using credit card for every day purchases and earning rewards. high-yield savings accounts are great. right now you can get 5% at the high end of the market so were talking totally liquid, and shorter savings accounts. i think it is great to use credit cards for the positive. i want to mention other people have credit card debt and there's no shame in that, it is often very practical reasons. it is often medical bill, car repair, home repair, or day-to-day living, but there are things you can do even if you have credit card debt. you can take on a 0% balanced transfer card and avoid interest to up to 21 months or work with a reputable nonprofit credit

counseling agency like money management international or take on a side hustle, cut your expenses. there are things you could do but ultimately we will at all due to the point where we are paying the bills in full, avoiding interest, and getting viable rewards like airline miles and cashback and hotel points. host: can you file bankruptcy? guest: you can. i think they'll be a last resort. if you're really struggling, nonprofit credit count like money management can be helpful because they can't negotiate better terms with your creditors. maybe they bring to credit card rate to 7% or 8% over four or five years and they will work with you to pay it back. that can help the credit over the long term. do not like that so cement. -- i do not like debt

settlement because of the credit core impact. these for-profit agencies that say will get you out of credit card debt for pennies on the dollar's but they often tell you to stop paying for a while, late payment stack up, credit court damage accumulates. as a point to get out ahead of it and communicate with your lender. stick a reptile nonprofit credit counseling agency. there are things you can do. valid transfer idea is a good one. it may be a personal loan is a form of debt consolidation. the minimum payment method is brutal. the average credit card balances of about $5,700 according to trans union you make minimum payments of the average interest rate will be in debt for more than 17 years and you pay more than $8,400 in interest. it is important to come up with a better plan. host: mary in las vegas. good morning to you. caller: good morning.

i pay it off and use it to improve my credit score and to get discounts which have been low my card. there are a couple things i would like to address. i had a home depot small balance. i owed $40 but when i paid the bill i saw the first number and saw $35 and thought that is what i owed and it was my last purchase. i got hit with the high interest rate. that was kind of my fault but annoying because it was one of those difference of a few. dollars and my other comment, i had and also pay and a --uto pay and to get the five dollar discount for the auto pay it they do not want to use the credit card because of the fees and they want to withdraw money directly out of my checking account or out of my

debit card. is there any danger in those? guest: i would not worry about that. i think it is annoying because the user of the credit cards and i love getting rewards and putting as many bills on there as possible and paying them off in full every month but that is something we are seeing more of. a lot of companies are price-sensitive. the typical interchange fee, the feet marches pay credit card companies for every transaction, is about 2.2% and with the money being tight and inflation being high some companies are trying to circumvent that need to a surcharge are pushing to another payment method. in general, i think credit cards are more secure than other forms of payment because it is a line of credit. it is the bank's money, not yours up until you pay them back. we should pay them back to him of course, but with the debit card, the money comes out of your account immediately.

if there is fraud you should get it back but it may take days or weeks and you're missing that. to paint a reptile bill online -- when it comes to paint a reptile bill -- double bill online i would probably go to the part of the discount the vietnamese using my card. i think of is something we may see continue to play out. in general, i think credit is safer but there is another incentive for you something else, maybe that makes sense. if you're shopping in an familiar sight, that is where i would worry about sharing think accounts or debit cards credentials. you should get the money back if there is fraud but it is more of a house so that it is with the credit card. host: james in mississippi. tell us your story. caller: good morning. i've never owned a debit card. i get a credit card and pay it off and i do not paid on the computer. i do not have a computer.

this is android phone i got. i pay by check and stamp and put it in the mail. i do not put my count online. for anybody to get. i pay all my bills with the credit card they usually get my credit card with discounts like gas 5% discount and i pay it off every month. i do not try to live above my means and you got to use discipline for what you by. that is what i have been doing all my life. i am 64 years old. host: are you saving money? caller: yes ma'am. when i graduate high school 1978 , i went to work at 12 years old and i was a cowboy and i worked at a grocery store. when i graduated i had $10,000 saved.

host: but if you do with that? -- what did you do with that? caller: fact intimate carter was -- back then jimmy carter was the president and interest rate i like it in for five years. host: james in mississippi. guest: i think you're hearing savvy stories which i think is great about people saving money and using credit card to their advantage. i would acknowledge i am sure we have viewers that have credit card debt create it is hard to talk about it. we have been the research and others have done would rather talk about anything else. they are ashamed about credit card debt. did a study people would rather talk about their weight, political views, religious views some potentially sensitive subjects and rather talk about that than a credit card debt. i want to acknowledge if you have credit card debt, you're

not alone. there are things you can do. 0% balance transfers, personal loans, credit counseling. critic card debt is a common issue although it is one want to talk about. it is more fun to talk about the cashback you earn or great trip you took those stories are out there but that big distinction is whether or not you're able to pay those bills in full every month. host: we are curious about how many calls we would get it from the do not own a credit card line this morning but to your point, we have not seen too many people calling in on the i have credit card debt line. guest: i think a lot of that is the stigma associated with the edit. we know almost half of cardholders, a third of all americans have credit card debt. it is very common. the probably come increasingly so because -- it will probably become increasingly so because

prices are high, money is tight for a lot of people. a close cousin to all this is by now pay later industry which is interesting to, companies like a firm affirm and afterpay. some of them position itself as the kinder gentler alternative to critic arms -- credit card because there is no interest and even if there is you know how much you owe for how long and sometimes there is behavioral finance quirks to it. it is not bills like dead if you know if i make these four payments of $50 or $100 then i am done with it. i think a lot of people are wrestling with these issues and we see people using a credit card or even using by now, pay later more commonly at places like grocery stores and gas stations that historically have been more of a place where people use debit cards for

day-to-day transactions. the ideal scenario is to use a credit card like a debit card. you pay in full and there is no interest but you get the viable rewards which are much better on credit cards and the buyer protections are better on credit cards to. host: what do you advise, using a credit card or saving yet that was the saving rate versus the credit card debt rate in this country? guest: personal saving rate is pretty low right now about 4%. i would argue credit cards could help you save if you can pay in full every month. the other is if you are avoiding overspending is in town that is hard to figure. there's been research done that there is less pain associated with pain with a card. a card of any type, i would put debit cards in that because even though it is a fixed amount coming in to your checking

account, there is more physical pain and inconvenience associated with cash. that is one idea for people struggling with debt. sometimes we say use cash for a while or keep a spending journal or know where your money is going. over time, hopefully you can get to a point where you're using a credit card just for routine transactions and getting those benefits. that is the ideal. to each their own creative people have different habits. the average american has about four credit cards. i know some people with 30 they have great credit. i would not try to get there overnight. that is a special case. you have other people that maybe they're are better off not using credit at all because it could get them into trouble. some people say credit cards are like power tools because they can be really useful or dangerous. you need to know yourself. host: westchester field, new

hampshire's, ron. welcome to the conversation. caller: good morning. "washington journal" best show on tv today. i love the show. i do not have a credit card and i would tell you why because in 2008 i had three credit cards and to no fault of my own, never went late on any payments, at all. the predatory banks for no reason at all rose my interest rate up to 29.9% of all three of my cards basically drove me into bankruptcy. it was a mess. i do have a question. at the federal government cannot loan money -- if the federal government can loan money to banks to subsidize banks that go belly up at 2% or 3% then those bays can take that same money

and it turned low and out at 25%, almost 30% interest rate and make a lot of money off of it, and of the federal government claims is not a bank, but yet it does that for banks and the banking industry, why can't the government come up with 2% or 3% loans for the average person that they can actually pay back? i'm getting credit card offers right now that they make it sound so great, apply now, 21 percent interest rate, great rate. just ridiculous predatory garbage. like you say, you get a credit card and get even 15% or 18% and years that thing before you even pay off early any of the principal. the government is going to bail out banks and loan the money at a small low interest rate for banks that make money and go belly up again, i wish federal

government would take some of the money and invest it in our general masses at a low percent that the general masses can use to help pull them out of their poverty or whatever wherever they are at in their life. at a reasonable rate and then maybe it will lift more people up. just handed over to the banks for them to frivolously waste on other things and predatory actions and stuff that draw people into bankruptcy, which i learned my lesson on in 2008, that was ridiculous. government was just as much to blame as wall street for the regulation. host: your reaction. guest: some of what you are saying it reminds me of what is playing out in student loan space. the biden administration was trying to cancel up to $20,000 per federal student loan debts

borrower then that was struck down by the supreme court recently. i think some of what you are saying sounds good to a lot of people. i think it would be a real clinical and legal hurdle. i tend to think it is more on the individual to use credit cards and pay off credit cards. one other area i thought you might be going with this is sometimes during recessions card companies slash credit lines or cancel cards without warning. the can no longer raise the interest rate like they did in your case without notice because the card act went into play in 2010 and that limited their ability to raise rates except in very special cases like if you pay 60 or more days lead, then your rate could go up to 29.9%.

fed actions can influence your read but otherwise they cannot just at a whim say all of a sudden your rate is higher. that was a positive change of the card act but one thing they can still do is change your credit limit or even cancel your card without warning. it is more likely to happen if your in distress, you paid late or bumping up against your credit line, or if you're not using the card much. that is something we hear about a lot. anytime the economy takes a turn for the worse, it happened a lot in 2020 where people would find the credit lines worse -- where slashed without warning. try not to use the credit card as emergency fund as the credit line would not always be there and try to keep inactive cards active. maybe the occasional small purchase can be paid off in full. do not let it go dormant because then you might lose the credit. host: built in pennsylvania. hi. caller: good morning.

my wife and i set up an escrow account and what we do is every month we put x number of dollars into the account so that when insurance, taxes, would have you come through, we have a nest egg we can draw from without hitting our checkbook. is essentially one of these things if you do not see the money, you do not miss it. it is work very well for us over a number of years. the other thing is that they are talking about the interest rate. i have found that credit unions rather than banks seem to give you a much lower interest rate. obviously, i am all for that. another thing is that when we

take our car to the garage through the garage and i'm not sure how they set it up, but if you pay -- you can take an option to pay over a six-month period that is interest free. whenever we go to that garage to have work done on the car, if it is more than $300, what i will do is, if it is a 450 dollar bill, i will say i'm going to pay wider $50 a month -- 150 a month and paid off and there is no interest on it. the people were able to take advantage of that that would help but like i say with the escrow account, that has worked very well for us. it took us some time to put now

we have a bit of a nest egg there so that if there is a major bill, not only on the car but a major bill on a house repair, we can hit that without depleting our checking account. host: you call it an escrow account. but he mean by that? it makes money why he sits in the account? caller: it is in the credit union and yes, it is making a poultry, half percent a month. maybe escrow account is not of the proper term but i put in a different way, it is an accessible savings account that we keep putting the money into it and we only draw on that for taxes, insurance. it is not used for everyday expenses. host: