Carrying a credit card balance is costing you $1,140 per year — and is about to get much worse

• Americans spent $164 billion on credit card interest and fees in 2022.
• The timing of this growth in debt couldn't come at a worse time.
• Not only are balances ballooning, but interest rates are also soaring.

Credit card debt is already at a record level and growing at a time when interest rates for those accounts are also skyrocketing.

For many, this debt is just another financial burden on top of things like auto and student loans and unaffordable housing that are putting a lot of pressure on the American consumer. However, credit card balances are especially worrisome because they are going to keep getting worse.

According to a new study from WalletHub, Americans spent $164 billion on credit card interest and fees in 2022. That exceeds the pre-pandemic amount of $158 billion and is 53% higher than in 2014 when it was measured at $107 billion.

To put that number in perspective, the average credit card account accrued $296.95 in interest and fees in 2022 — in 2021, that figure was $264.47.

Now consider that at the start of the pandemic, the average American held 3.8 credit card accounts, according to the consumer credit reporting company Experian.

That means the average American could be spending $1,140 every year on credit card interest and fees alone.

According to SoFi Bank, the average salary for Americans in 2022 was $60,575. That means the average American adult loses nearly 2% of their pre-tax income just by paying credit card fees and interest.

That is also just the average. According to the Federal Reserve, 40% of American adults carry a credit card balance from one month to the next. So, the outstanding balances, associated fees, and interest disproportionately affect that group. Some accounts without balances still have some charges, such as annual fees, but this suggests that the average American who carries a balance is spending much more than $1,140 every year on fees and interest.

The timing of this growth in debt couldn't come at a worse time.

Americans have been accruing a lot of credit card debt at a terrible time

According to the Federal Reserve Bank of New York, Americans had nearly $1.1 trillion in credit card debt in the third quarter of this year. Balances have now increased for eight consecutive quarters.

But that is just part of the problem. Not only are balances ballooning, but interest rates are also soaring.

The Federal Reserve first started hiking rates in March 2022 in an effort to get inflation under control. Credit card interest rates, which had already been at their highest level since the mid-1990s, started soaring even higher.

According to the Fed, the interest rates are still growing at a substantial pace. The average interest rate for accounts accruing interest was 22.8% in the third quarter of this year, up from 22.2% in the second quarter.

And things are getting worse for new accounts.

According to LendingTree, the average annual percentage rate offered for a new credit card is now 24.6%, the highest since they began tracking the rates in 2019.

We are also seeing more credit cards surpassing the 30% annual percentage rate barrier, which was considered a no-no in the past, with some going as high as 33.2%, according to Bankrate.

"We used to see 30% as the high end for retail credit card APRs," wrote Ted Rossman, Bankrate's senior industry analyst. "In fact, 29.99% was an artificial barrier that few dared to cross — for psychological reasons, mostly. But the market has blown past that threshold."

Of course, having a credit card balance means more than interest and fees. Those balances need to be paid back at some point.

Meeting minimum payments is getting harder for many

According to WalletHub's research, the average balance for a credit card in 2022 was $5,525, with a minimum monthly payment of $110.50.

A survey performed by New York Life at the end of 2022 found that the average US adult respondent with credit card debt paid an average of $430 per month towards paying off that debt.

The burden is forcing more Americans into delinquencies. According to the New York Fed, the percentage of newly delinquent credit card users has risen sharply in the last two years and now exceeds pre-pandemic levels.

We are also seeing more credit card accounts in "persistent debt," where the amount of interest and fees being charged to the account is greater than the amount of principal being paid down by the account holder.

According to Consumer Financial Protection Bureau data shared with CNN, 9.9% of general-purpose credit card accounts in the US in 2022 were in "persistent debt." That was up from 8.4% the year before.

A bit of relief may be coming

The Biden administration is aiming to crack down on "junk fees," which are fees that can confuse consumers because they are not obvious upfront. This would include lowering credit card late fees from about $30 to $8.

But that might be a bandaid on a broken leg.

Lowering late fees could save Americans $9 billion but would still leave about $155 billion in interest and other fees. And those are still growing.

Then there is the growing use of buy now, pay later programs, which let shoppers pay in installments every week or month. While the Fed's "2022 Survey of Household Economics and Decisionmaking" found that 83% of respondents paid off their buy now, pay later programs on time — avoiding interest payments — there is a risk that paying on time becomes less common as overall consumer debt continues to grow.

To be sure, there are a lot of positive signs in the economy right now, like cheaper prices combined with consumer spending, that have improved the chances of avoiding a recession. But with credit card debt going through the roof, the blissful spending could come to a screeching halt.