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Many Americans have exhausted their savings as credit card debt hits a record high

ARI SHAPIRO, HOST:

The financial situation of Americans has done kind of a 180 in the last couple years. We went from having one of the highest personal savings rates on record in 2021 to one of the lowest on record. And credit card debt is rising at a record pace after having dipped way down in 2021. NPR's Stacey Vanek Smith has the story.

STACEY VANEK SMITH, BYLINE: Stephanie Roth (ph) realized how much her financial situation had changed when she was signing up to bring a dish to the Valentine's Day party at her kids' day care.

STEPHANIE ROTH: I used to always be the mom who would sign up for, you know, the main stuff like the sandwiches and the meats and the this and the that - the big, expensive things.

VANEK SMITH: Roth has three young children. She's 41 and lives in Lebanon, Tenn., just outside Nashville. Before the pandemic, she was in a good financial situation. She could bring the sandwiches and the soda and the cupcakes. But looking at the sign-up sheet last month, she realized she could not do that anymore.

ROTH: I was literally looking at the list, and I was thinking like, what has inflation maybe not messed with? And I signed up for, like, bananas 'cause was like, they're still 59 cents a pound.

VANEK SMITH: Roth has a full-time job - earns about $40,000 a year working as an administrative medical assistant. And she's always been good with money. But during the pandemic, she went through a divorce and took full custody of her kids, ages 2, 4 and 6. That meant a complete change in her finances and lifestyle. Roth was suddenly supporting her whole family. One of her top expenses - day care.

ROTH: It's, like, $1,500 a month. I mean, it's half my paycheck, basically, you know?

VANEK SMITH: Between that, the rising price of gas, food and clothes, Roth says her paycheck feels like it's spent before she even takes it home - actually, more than spent.

ROTH: You know, cellphone bill came up due, and I didn't have the money in my checking account. So I've had to pay - you know, pay with my credit card.

VANEK SMITH: Roth started leaning on her credit card to pick up the extra expenses her paycheck couldn't cover. At the same time, her credit card company was raising interest rates from 15% to more than 22%. Roth watched her debt grow along with the minimum payments. And then there were these unexpected expenses that started this kind of spiral.

ROTH: My middle daughter recently fell and kind of hit her chin on the floor and had to have two stitches in her chin. She's OK. Everything's fine. But it was an $800 ER trip.

VANEK SMITH: Roth's credit card debt seemed to explode from a few thousand dollars to more than $10,000. And right now Roth owes about $25,000 to the credit card company.

ROTH: Sometimes it feels very, like, heavy, like, crushing, you know? And I just think about, you know, I'm going to have to pay this back. I have to pay this back. And I don't know how that's going to - you know, if I do minimum payments - what? - I'll be, like, 300 when it's paid off, you know?

VANEK SMITH: Millennials like Roth have seen their debt rise by nearly 30% since before the pandemic to about $3.8 trillion. What's strange about this is back in 2021, that debt had fallen near record lows.

JILL SCHLESINGER: We saw Americans across the income stream save a lot of money - I mean, a lot of money.

VANEK SMITH: Jill Schlesinger is the author of "The Great Money Reset." She's also a certified financial planner. She says stimulus checks, lockdown and lots of pay raises had people in really strong financial shape a couple of years ago.

SCHLESINGER: Then all of a sudden, 2022 starts, and inflation doesn't go down. It actually continues to accelerate. And so we saw many people plow through those pandemic-era savings and left with nothing. For a lot of people, this is not so much going out and buying something fancy. Things are more expensive. And just to keep up with where you were last year, you have to pay a lot more.

VANEK SMITH: Credit card debt in the U.S. has been rising at one of the fastest rates in history. We collectively owe nearly a trillion dollars on our cards. That is an all-time high. And Schlesinger says with interest rates rising on those cards, getting ahead of the debt gets harder and harder. So millions of Americans like Stephanie Roth are falling behind on their finances. But here's the other thing. Roth actually makes too much money to qualify for aid or free services that might help her financial situation - things like free pre-K for her daughter or SNAP food assistance.

ROTH: I've, like - I just make enough to, like, not be poor enough to (laughter) qualify for services. I don't know, 'cause I'm like, dude, I am so poor. Like, you don't even know.

VANEK SMITH: Roth tries every month to pay a little more than the minimum payment, but most of the time it just doesn't happen. At the same time, she worries that her kids are missing out on things.

ROTH: I mean, that's probably going to be my biggest focus, is, like, you know, just making sure that they are having those fun, you know, memorable moments that they might, you know, think is special; so this is a special time; or that could give them, you know, joy or, you know? 'Cause it's been hard. We've all been through a lot, like, the last, you know, year or two.

VANEK SMITH: Roth dreams of having extra money to take her kids out for ice cream without having to plan for it or to the Build-A-Bear store and of her being able to be the mom who signs up to bring sandwiches and cupcakes to day care instead of the bananas.

Stacey Vanek Smith, NPR News. Transcript provided by NPR, Copyright NPR.

Stacey Vanek Smith is the co-host of NPR's The Indicator from Planet Money. She's also a correspondent for Planet Money, where she covers business and economics. In this role, Smith has followed economic stories down the muddy back roads of Oklahoma to buy 100 barrels of oil; she's traveled to Pune, India, to track down the man who pitched the country's dramatic currency devaluation to the prime minister; and she's spoken with a North Korean woman who made a small fortune smuggling artificial sweetener in from China.