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Almost half of Americans expect to rack up more debt in the next six months: Report

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Yahoo Finance's Kerry Hannon breaks down a recent LendingTree report on U.S. household debt and how consumers can manage their spending during times of economic uncertainty.

Video Transcript

[MUSIC PLAYING]

RACHELLE AKUFFO: Welcome back. With inflation at 40-year highs and recession fears mounting, there's no wonder Americans are worried about their wallets. According to a new LendingTree survey, 43% of Americans expect to rack up more debt in the next six months. Well, here to break down the survey findings is our very own personal finance reporter, Kerry Hannon. Good to see you, Kerry. So what kind of debt are people expecting to accumulate?

KERRY HANNON: I don't-- they're looking at what people have now is the debt that they currently are holding is often in what they call necessities, and even medical expenses and those things. But a study that LendingTree did earlier this year said that people racked up credit card debt on things that made them happy, like restaurants and travel. So I kind of say I think it's across the board, what people are spending on. And they're throwing it on the plastic because of kind of the cash crunch.

So, to me, it's deeply concerning for a lot of reasons because, as we know, if the Federal Reserve ratchets up interest rates again, the rate next week, we are going to see this reflected back in the credit card rates because these tend to be variable rates that go hand in glove with what the Fed decides to do. So I really urge people to be very cautious about this.

Now, it's not-- it looks like it's not really the boomers who are aiming to spend more, but it's more like the millennials and Gen X. So, you know, I don't know who's out there doing it, but please be careful is all I can say.

DAVE BRIGGS: American Express up about 2% on the day. So beyond the obvious of cutting back spending, what can we do to be proactive?

KERRY HANNON: Well, I'm so glad you asked that because that's what people have to do. You really need to take control of the credit card debt because LendingTree shows that some 60% of people already have-- are carrying debt with them. So the most important thing is, if you think you are going to have to be using that plastic and adding to your credit card debt through the rest of this year, try to look for a low interest credit card. The average credit card rate now is 17.25%. Gulp, gulp, gulp.

And the people I talked to today, the experts here, tell me that it can easily go to 18% or 18.5 by the end of the year, depending on what the Fed does. So you really have to pay attention. So look for those low rate cards. If you're carrying debt, call your lender and your credit card company and say, can you negotiate with them for a lower rate or to remove fees if you're late paying? They will listen to you. So pay attention to doing those things.

And really think about these balance transfer credit cards that allow you to transfer a big balance to another card for a 0% interest rate. And they usually last around 21 months. You will pay a small fee on the balance you transfer, maybe 3% or so. But again, it could really save you and let you start putting together that budget so you can get lean and mean and pay attention to your financial knowledge. And really look at what you're spending and look forward to creating a financial plan so you really don't dig yourself into too much of a hole during the rest of this year and onward.

JARED BLIKRE: Always great to see you on a Friday afternoon, Kerry. Thank you for stopping by.