According to the New York Federal Reserve, Americans currently face unprecedented levels of debt. In the second quarter of 2023, credit card debt exceeded $1 trillion for the first time, contributing to a total household debt of $17.06 trillion, which is also a new record.

However, a recent analysis by WalletHub suggests that when adjusted for inflation, credit card debt was actually higher during the 2008 economic downturn. WalletHub’s CEO, Odysseas Papadimitriou, believes that people are now managing their debt more effectively than in the past, despite inflation masking this improvement.

Papadimitriou argues that U.S. households are in better financial shape than they may appear. When considering the impact of inflation on debt balances and the fact that debt-to-deposit levels are significantly lower than their peak, he believes that Americans are managing their finances more responsibly.

Deposits, which include checking and savings accounts, as well as certificates of deposit and money market accounts, contribute to this positive assessment.

Despite signs of a slowdown in credit card spending growth, Americans continue to prioritize purchases over saving. The San Francisco Fed warns that the excess savings accumulated from government aid will soon deplete.

Bankrate’s chief financial analyst, Greg McBride, expresses concern not only about the increasing credit card balances but also the rising number of cardholders who carry debt from month to month. According to a Bankrate report, 60% of those with card balances have been in debt for at least a year. This situation persists despite historically low levels of unemployment.

John Sedunov, a finance professor at Villanova University, highlights the importance of higher interest rates on household borrowing costs. Goods, services, and money itself are all more expensive. The average credit card rate has reached an all-time high, exceeding 20%.

Bankrate calculations show that paying only the minimum amount on the average credit card balance would take over 17 years to repay, incurring more than $8,366 in interest. McBride emphasizes that the growing balances and the increasing number of households with debt reflect the financial strain experienced by many.

Despite the challenges of rising debt and interest rates, savers may benefit from higher returns on their cash. Bankrate reports that top-yielding online savings account rates are currently above 5%, the highest since the 2008 financial crisis. Some short-term certificates of deposit offer even higher rates.

Mark Hamrick, Bankrate’s senior economic analyst, encourages individuals to take advantage of this opportunity for higher yields on savings products.