Rising prices push many Americans further into credit card debt

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• Amna Nawaz:

  Welcome to the "NewsHour."

  Americans received some good news today on inflation. The Consumer Price Index rose 6.5 percent in December compared with a year ago. That is down from 7.1 percent in November and marks the sixth consecutive month of falling inflation rates.

• Geoff Bennett:

  But Americans are still feeling the pinch from higher-than-usual prices. And many have been forced to pull out their credit cards, even while interest rates on those cards are soaring.

  For a closer look at what this means, we turn to Michelle Singletary, journalist and author of the syndicated Washington Post column "The Color of Money."

  Welcome to the "NewsHour."

• Michelle Singletary, Personal Finance Columnist, The Washington Post:

  Oh, thank you for having me.

• Geoff Bennett:

  So, more Americans are leaning on their credit cards to deal with rising prices. And, as interest rates continue to climb, the debt is becoming more expensive.

  How big of a problem is this, Michelle?

• Michelle Singletary:

  Well, it's a pretty big problem.

  The Fed is obviously trying to fight inflation. And that has resulted in an increase in credit card rates of up to now 20 percent on average across the nation. So, that means that those folks who are carrying credit card debt from month to month are paying significant more interest on that debt.

• Geoff Bennett:

  In planning to speak with you, we asked our viewers for their questions about all this.

  Here's one from Phillip Stachelski of California.

• Phillip Stachelski, California:

  Probably my biggest question would be on debt consolidation and stuff like that. What is the best way to go about it? What is the best way to consolidate that debt? Because it feels like there's so much out there and there's just so little information of what is trustworthy, what could work.

• Geoff Bennett:

  All right, so what are some best practices when it comes to debt consolidation?

• Michelle Singletary:

  So one thing that I recommend is that, before you consolidate that debt, make sure that what impacted you having that is gone.

  So if you're going to still be adding to that, you're just going to sweep all that debt off credit cards, and guess what? People then end up putting more on there. And you also want to make sure that, when you consolidate, you're not going to, at the end of the day, pay more.

  If they stretch it out, and the interest rate might seem lower, you actually, at the end, might be paying more on that credit card debt. I would rather you contact your credit card lender and say, I'm having trouble. How can you help me?

  Lots of people don't make that call. And it's understandable. You are thinking, well, I don't have the money. They're not going to help me.

  But one of the things that credit card lenders told me is that people don't call to get help. And they will help you.

• Geoff Bennett:

  For folks whose incomes haven't kept pace with inflation, what should they do?

  I suppose the easy answer is to stop using your credit cards, but, for a lot of people, they don't have that luxury.

• Michelle Singletary:

  Yes, I know that people don't want to hear that. And, obviously, they're struggling.

  But if you can, and you have got a lot of debt on your card, you must put it away. That means going back to your budget, cutting everything you possibly can. It may mean changing your — where you live, your housing. Perhaps you can move in with someone or someone can move within with you, because that's the biggest impact to people's budget, is their housing.

  But the one thing I want you to do is trying not to go to payday lenders. Don't try to add on to debt in an emergency-type situation, because, oftentimes, that ends up increasing how much you owe. And if, for example — with payday loans, you get one, then your next payday comes in, you have got to pay that loan off, and you are already in the hole.

  So, again, contact your lenders. You might look into, if your credit is still good, you can see if there is any zero percent offers out there that you qualify for. Transfer the debt to that, and then take that time to pay it off. And make sure that you can pay it off, though, in that introductory period, which can be anywhere from 15 months — 12 months, 15 months or 18 months in some cases, if you have got really good credit.

• Geoff Bennett:

  So, lastly, Michelle, inflation is slowing. Is it enough now for the Fed to pull back on these interest rate hikes?

• Michelle Singletary:

  They have already said that they are going to still probably continue to do the rates. It's slowing, but it's not where they want it to be.

  So I think the word for 2023 is still, inflation is going to be with us. That means cut as much as you can. Look at your budget. And, most importantly, if you can't, don't charge up and carry that credit card debt, because it's going to be so expensive in this next year or two.

• Geoff Bennett:

  Michelle Singletary, thanks so much for your time and for your insights. We appreciate it.

• Michelle Singletary:

  You're welcome. Thank you for having me.