High interest rates are pushing low- and moderate-income Americans who have fallen behind on credit card payments and auto loans to the brink, according to a new report.
"It’s crazy," 43-year-old Army veteran Ora Dorsey told The New York Times. "It does make it hard to get out of debt. It seems like you’re only paying the interest."
"We don’t have the credit to be able to buy a house, and we have a bunch of debt, either student loans or credit card debt," 31-year-old Chris Nunn, who drives for the DoorDash delivery app, told the Times. "So we’re trapped."
Dorsey told the outlet she has been trying to cut down debts accrued following various health issues for years. She is working three jobs to cut down her substantial debt.
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"How am I supposed to retire?" she said. "I’m not able to save, have that rainy-day fund, because I’m trying to take down the debt that I have."
Virginia Diaz, a 74-year-old who moved to Florida from New York, expressed a similar perspective. Her willingness to help struggling family members, including a niece with health issues, has put her retirement in jeopardy.
"Every time I make a payment to my credit card, most of the money is going to pay interest, and that just snowballs," she told The New York Times. "I’m at the end of my rope."
"I know [Federal Reserve officials] mean well, but it’s not working," Diaz added. "Lower it, for God’s sake, so people can live. Give us half a chance to give us a decent level of living."
The Fed has indicated that interest rates, the highest in decades, are unlikely to decrease anytime soon as inflation continues to impact the country. This move has unearthed a divide among American families, with high-income households largely unscathed by Fed policies. Those who took out long-term mortgages during the pandemic are reaping the benefits.
UBS senior economist Brian Rose said in the Times report that higher-income households "feel very flush."
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"They’ve seen such a huge run-up in the value of their house and the value of their portfolios that they feel like they can keep spending," he said.
Those with substantial savings also benefit from higher savings returns. However, poorer families and many in the middle class carry credit card balances.
The divide is significant. Fed data has suggested 56% of people who make less than $25,000 carried a credit card balance in 2022, according to the Times, while only 38% of those making over $100,000 did the same.
Chicago financial counselor Barbara Martinez told the Times that her low-income clients are struggling to pay off debt amid staggering food and rent prices. Many of them do not have the savings to cover unexpected costs, such as illnesses.
"You’re trying to get out of the ocean, but the waves keep pushing you back," she said. "No matter how much you swim, you get tired."
According to a FOX Business report earlier this month, progress on inflation has stalled since last summer. The Fed's favorite gauge shows that inflation is running at a 2.7% pace — well above the central bank's 2% goal. When excluding food and energy, underlying core inflation came in even hotter at 2.8%.
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Hiring has continued and the unemployment rate remains low in the U.S., but as the Times noted, under the surface, many Americans are struggling to get out of financial trouble.
FOX Business' Megan Henney contributed to this report.
