High inflation is forcing Americans to use credit cards at unprecedented rates and pay for groceries and other essentials with plastic, helping push debt to record-breaking levels and boosting profit and revenue for credit card companies.

Americans are up to their armpits in $988 billion in credit card debt — the highest amount ever, according to the Federal Reserve — as the price of food, rent and other essentials keeps going up.

Credit card debt up 33 percent in 2 years

Credit card debt has increased 33 percent since April 2021, when it reached $740 billion, the Fed reported.

Traditionally, credit card debt has gone down in the first quarter of the year as Americans pay off holiday bills. That didn’t happen in 2023 for the first time since the 2001 recession, CNet reported. Instead, people used their cards to pay for essentials rather than Christmas gifts or vacations, analysts say.

Revenue, profits up at credit card companies

Payment processing giant Visa reported a 14 percent increase in profits in the second quarter as the company continues to benefit from the increase in credit card use.

Revenue at American Express rose 22 percent in the first quarter to $14.3 billion but profit fell 13 percent. Spending by tech company’s wealthy customers surged 30 percent on travel and entertainment, and American Express stands by its profit forecast for 2023, Reuters reported.

Credit card interest rates are the highest on record

Credit card interest rates are close to 21 percent, the highest average on record, up from 16.34 percent in March 2022.

Higher interest rates mean higher credit card debt. Most credit cards have variable interest rates, which means the interest rate can keep increasing if the Fed continues to raise the federal funds rate, which it has done 10 times since March 2022.

The interest rate could rise again due to the recent Fed rate hike in May.

“That means you should start managing your credit card balances more strategically,” wrote Poonkulali Thangavelu. “If you carry a balance, make plans to pay it off. If you will be carrying a balance for a while, you could transfer it to lower-interest options, such as a 0 percent interest balance transfer offer.”

New credit cards offered annual percentage rates averaging 22.15 percent in the first quarter of 2023, up from 18.32 percent for the same period in 2022, CNet reported.

The average balance on credit cards was $5,910 at the end of 2022, up 13.2 percent from a year earlier, according to the Experian credit bureau.

USA Today reported a higher balance of $7,951 based on its analysis of data from the New York Fed and the U.S. Census Bureau.

About 43 percent of Americans pay just the minimum on their credit cards, which goes mostly toward the interest, leaving the balance practically unchanged. For example, paying the monthly minimum on a $5,000 balance at 17 percent APR could take ten years and cost an extra $5,000. Avoid this pitfall, Dan Avery wrote for CNet.

A credit card company may approve you for a hardship assistance program, lowering your interest rate or allowing a temporary deferment of payments, though your credit score could take a hit.

People who declare bankruptcy to escape from credit card debt may not be able to borrow money to buy a car or a house for 10 years or more, according to The Conversation.