What’s Behind $1 Trillion in Credit-Card Balances?

livemint.com:

credit cards at TD Bank. High interest rates are supposed to slow spending by rewarding savers and making it more expensive to borrow money—including on a credit card. But so far, many credit-card users haven’t felt burdened by higher rates despite the Federal Reserve recently raising its benchmark rate to a 22-year high.

Part of the reason borrowers have done well is that credit-card companies fighting for market share have continued to shower consumers with 0%-interest promotional offers. Those offers have helped lenders open a record $89 billion worth of new credit lines so far this year, according to data from the Federal Reserve Bank of Philadelphia. While higher interest rates make existing card debt more expensive to manage, federal regulations require that card issuers set minimum monthly payments that cover all of the finance charges.

That means higher interest rates can’t grow balances on their own. Behind the Balances One main reason balances are up is Americans are spending more on nonessentials such as travel and clothing, even as they curb spending in other categories, according to a survey by Morning Consult. Though the majority of people say they are still able to save, a growing share of adults are reporting rising debt levels, the survey showed.

“It doesn’t look sustainable to me," Kayla Bruun, an analyst at the economic research firm, said of people’s spending habits. If higher minimum payments are straining your budget, you should probably refinance your debt with a personal loan or balance-transfer offer, said David Silberman, a senior fellow for the Center for Responsible Lending. There are several ways to refinance, including transferring multiple balances onto one lower interest-rate card.