US credit card debt soars to $1.21 trillion—5 key lessons for Indian consumers | Mint

The most recent report from the Federal Reserve Bank of New York reveals that credit card debt in the United States has reached a record high of $1.21 trillion.

Though the record high figure indicates the fiscal situation in the United States, it also holds valuable lessons for Indian cardholders, given that credit card spending is gradually gaining traction in India.

Here are five useful takeaways:

• Budget wisely: Rising US credit card debt was funded in part through higher holiday season spending. Indian credit cardholders must exercise as much care even during festivals and shopping festivals and must equally refrain from adopting impulse purchases for the motive of building up a debt burden.
• Monitor your credit utilization: Based on the Federal Reserve Bank of New York report, credit card debt increased by $45 billion in the fourth quarter of 2024. Therefore, it is important to keep your credit utilization ratio low (the amount you are utilizing versus the available to you as a credit limit) below 30%. It is nothing but sound credit management and reflects favorably on your credit score.
• Pay on time: The delinquency rates of credit cards have been high, meaning most of the borrowers are falling behind payments. That is why the lesson here for all Indian credit card holders is to pay their credit card bill on time. Set up reminders, alarms or pay automatically to avoid financial penalties and damaging your credit rating.
• Understand the impact of inflation: Increased inflation has diminished the fiscal buffer of most Americans to the extent that they had to depend more and more on credit card debt. Indian consumers need to clearly understand how inflation eats into their purchasing power and then make appropriate adjustments in their expenses accordingly. Genuine budgeting and not using credit cards on essentials should always be given preference.
• Review your credit report, maintain a clean credit profile: Reviewing your credit report i.e., credit score is of great significance. Review your credit report on a regular basis for any fraud, unauthorized inquiries, or mistakes. This will help you catch any issues early and maintain your credit worthiness.

Though the economies of the US and India are one of a kind, the global principles of reasonable use of credit cards are the same everywhere on the planet.

Following the trend of the US, Indian credit card holders can also be cautious, use their credit carefully, and guard themselves from an endless debt trap.

Consumer expenditure rises when household savings go down. Staying well informed and vigilant is the slogan of financial wellness in a dynamic economic scenario.

(Note: Using a credit card carries its own set of risks)