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Americans have racked up a record-breaking $1 trillion in credit card debt.
As consumers struggle to pay down high balances at more than 20% interest, 39% of adults now say credit card debt is their biggest obstacle to building wealth, according to a new Edelman Financial Engines report.
Credit card rates have spiked along with the Federal Reserve’s string of 11 rate hikes, including four in 2023.

Consumer spending has remained remarkably resilient in the face of persistent inflation — but that has come at a cost.
To keep up with higher prices, Americans racked up more credit card debt than ever this year. Not only are balances higher, about half, or 47%, of cardholders are carrying debt from month to month, creating a cycle that’s particularly hard to break.

“Credit card debt is easy to get into but hard to get out of,” said Ted Rossman, senior industry analyst at Bankrate.
Now, 39% of adults said credit card debt is “their biggest threat to building wealth,” according to a new Edelman Financial Engines report. Even among wealthy respondents, or those between the ages of 45 and 70 with household assets of up to $3 million, 32% said the same.
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Unlike other types of debt, such as a mortgage or even student loans, “credit card debt is not secured by an asset that potentially gains value over time,” said Rod Griffin, senior director of consumer education and advocacy for Experian.
“For that reason, taking on too much credit card debt can chip away at a person’s financial health.”

Yet, a prolonged period of higher prices has caused consumers to spend down their savings and lean on credit anyway.

Credit card debt spikes as APRs rise

Collectively, Americans now owe a record-breaking $1.08 trillion on their credit cards, according to a November report from the Federal Reserve Bank of New York.

At the same time, credit card rates have spiked along with the Federal Reserve’s string of 11 rate hikes, including four in 2023. The average annual percentage rate rose from less than 15% as recently as last year to more than 20% today — also an all-time high.
Despite the steep cost, consumers often turn to credit cards, in part because they are more accessible than other types of loans, according to Matt Schulz, chief credit analyst at LendingTree.
But that spending comes at the expense of other long-term financial goals.
“If you are not grounded in long-term goals, short-term budgeting can get away from you,” said Kelly O’Donnell, chief client officer at Edelman Financial Engines. Instead, “set up long-term goals and work backwards.”

Credit cards can be a valuable tool

“However, when credit cards are used well, they can help achieve financial goals,” Experian’s Griffin said.
For example, consumers who pay their balances in full and on time every month and keep their utilization rate, or the ratio of debt to total credit, below 30% of their available credit, can benefit from credit card rewards and a higher credit score, which paves the way to lower-cost loans and better terms. That can be significant when it comes to major milestones, such as buying a house or qualifying for an apartment rental.
“In the end, it’s the decisions the consumer makes about how they use the credit card that determine whether it becomes a financial threat to building wealth or a tool in helping them achieve their financial goals and dreams,” Griffin said.
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The Supreme Court on Tuesday is hearing oral arguments for Moore v. United States, a case that could affect broad swaths of the U.S. tax code.
The case involves a Washington couple who own a controlling interest in a profitable foreign company affected by a tax enacted via former President Donald Trump’s 2017 tax overhaul.
The ruling could affect future taxation of so-called pass-through entities, such as partnerships, limited liability corporations and S corporations.

People exit the Supreme Court building in Washington, D.C. on Tuesday, June 27, 2023.
Minh Connors | The Washington Post | Getty Images

The Supreme Court is set to hear oral arguments Tuesday on a case that could affect broad swaths of the U.S. tax code and federal revenue.
The closely watched case, Moore v. United States, involves a Washington couple, Charles and Kathleen Moore. They own a controlling interest in a profitable foreign company affected by a tax enacted via former President Donald Trump’s 2017 tax overhaul.

The Moores are fighting a levy on company earnings that weren’t distributed to them — which challenges the definition of income — and could have sweeping effects on the U.S. tax code, according to experts.
“This could have the biggest fiscal policy effects of any court decision in the modern era,” said Matt Gardner, a senior fellow at the Institute on Taxation and Economic Policy, who co-authored a report on the case.
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The case challenges a levy, known as “deemed repatriation,” enacted via the 2017 Tax Cuts and Jobs Act. Designed as a transition tax, the legislation required a one-time levy on earnings and profits accumulated in foreign entities after 1986.
While the 16th Amendment outlines the legal definition of income, the Moore case questions whether individuals must “realize” or receive profits before incurring taxes. It’s an issue that has been raised during past federal “billionaire tax” debates and could affect future proposals, including wealth taxes.

Former House Speaker Paul Ryan, who helped draft the Tax Cuts and Jobs Act, said at a Brookings Institution event in September that the goal was to “finance a conversion from one system to another, and it wasn’t to justify a wealth tax.”
Ryan, who doesn’t support a wealth tax, said using the Moores’ argument to block one would require getting rid of “a third of the tax code.”

Pass-through businesses could be affected

Depending on how the court decides this case, there could be either small ripples or a major effect on the tax code, according to Daniel Bunn, president and CEO of the Tax Foundation, who has written about the topic.
If the court decides the Moores incurred a tax on unrealized income and says the levy is unconstitutional, it could affect the future taxation of so-called pass-through entities, such as partnerships, limited liability corporations and S corporations, he said. 

“You’ve got to pay attention to the way the rules are going to impact your business, especially if you’re doing things in a cross-border context,” Bunn said.
There’s also the potential for a “substantial impact” on federal revenue, which could influence future tax policy, Bunn said. If deemed repatriation were fully struck down for corporate and noncorporate taxpayers, the Tax Foundation estimates federal revenue would be reduced by $346 billion over the next decade.
However, with a decision not expected until 2024, it’s difficult to predict how the Supreme Court may rule on this case. “There’s a lot of uncertainty about the scope of this thing,” Gardner added.
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Homeowners have mostly stayed put in 2023 amid high mortgage rates.
Yet, those homeowners may be willing to move for the right opportunity, a new survey shows.
Prospective buyers are more willing to take a chance.

itsskin | Getty

Why many homeowners are ‘staying put’

Last week, the average interest rate for certain 30-year fixed-rate mortgages decreased to 7.37% from 7.41% the prior week, in the fourth successive week of declines. Lower mortgage rates have prompted mortgage applications to pick up.

Yet, about 80% of outstanding U.S. mortgages have interest rates below 5%, according to Bank of America’s research. Even the recent decline in mortgage rates may not provide incentive for homeowners to move.

“The story for 2023 has been one of homeowners staying put,” said Daryl Fairweather, chief economist at Redfin.
Factors that have contributed to that immobility have recently started to ease, though it remains to be seen whether that will last.
The median monthly mortgage payment is down more than $150 from the peak, marking the lowest level in three months, Redfin’s Nov. 30 research found. Monthly payments are falling as mortgage rates come down from their peak.
The weekly average 30-year mortgage rate fell to 7.29% in late November, down from a 7.79% high in October, according to Redfin.
Those declining rates have offset rising home prices, with the median sale price up 4%. The number of new listings, which is up 6%, has had the biggest year-over-year increase since 2021, according to Redfin.

More prospective buyers willing to take a risk

More prospective homebuyers may be willing to take a chance to reach their goal, with 62% indicating they are waiting for prices and/or rates to fall before buying a home, down from 85% who said the same six months ago, according to Bank of America.
Major life events tend to prompt people to move, according to Skylar Olsen, chief economist at Zillow.
“The problem is, right now, the finances block people from following that major fundamental change,” Olsen said.

For example, they may choose to struggle through a long commute to a new job while they wait for lower home prices, she said.
That may be poised to start to shift in 2024, but it will likely be very gradual, Olsen said.
Zillow’s forecast has called for mortgage rates improving very slowly, which means the number of new listings may also improve very gradually, she said.
Prospective buyers who are hoping for a big drop in home prices will be disappointed, Olsen said.
Rather than a dramatic decline, there will likely be slower home price growth over the next five years, she said, barring any big changes to current dynamics.Don’t miss these stories from CNBC PRO: More

Your Money

A lot of people feel stretched too thin, but when broken down by gender, 59% of women are living paycheck to paycheck, compared to only 41% of men, a recent report found.
Of those who are considered financially fragile, 67% are women.

The number of Americans who say they are stretched too thin has remained stubbornly high.
Amid a prolonged period of high inflation, more than 60% of Americans are living paycheck to paycheck.

However, women are “significantly more likely” than men to have a hard time making ends meet, according to a recent report from Varo Bank.
About 59% of women are living paycheck to paycheck, compared to 41% of men, Varo Bank found. Further, 67% of women consider themselves financially fragile, or say they have little financial slack or support.

More from Women and Wealth:

Here’s a look at more coverage in CNBC’s Women & Wealth special report, where we explore ways women can increase income, save and make the most of opportunities.

‘We start with less money in our pockets’

Due to a persistent gender wage gap, women still earn only 80% of what their male counterparts do. They are also more likely to be caregivers, which causes them to take breaks from their careers or work part time.
That contributes to a growing wealth discrepancy, which is especially difficult to manage for those nearing retirement, according to Stacy Francis, a certified financial planner and president and CEO of Francis Financial in New York.
“Not only do we start with less money in our pockets, but we also live longer and our costs in retirement are higher,” Francis said, who is also a member of the CNBC Financial Advisor Council.

Financial literacy is ‘the No. 1 thing’

Francis advises her female clients to consider that at some point, “they are going to be on their own.”
To get on solid financial ground, “financial literacy is the No. 1 thing women can do today,” said Maggie Wall, head of diverse growth markets at Citizens, which could include meeting with a financial advisor to go over short- and long-term plans.  

Women are achieving increasing levels of education, earning more and becoming the primary breadwinners, yet many also say they are less engaged when it comes to financial decision-making compared to men, according to a separate Own Your Worth report by UBS.
“That’s a big problem,” Francis said.
“What I encourage people to do is lump good money management into physical health and wellness,” she said. “Having that same commitment and drive is really important.”Don’t miss these stories from CNBC PRO: More

Since 2013, there has been a significant increase in the number of states requiring students to take a personal finance course before graduation, according to a report from Champlain College.
The report showed Alabama, Iowa, Mississippi, Missouri, Tennessee, Utah and Virginia all earned an “A” grade because those states required 2023 high school graduates to take a personal finance course. 
In the next five years, more than 4 out of 10 high school students in the U.S. will be enrolled in high schools where a personal finance course will be required before graduating.

High schools have been buzzing about financial education.
The latest “report card” from the Center for Financial Literacy at Champlain College in Burlington, Vermont, shows seven states — Alabama, Iowa, Mississippi, Missouri, Tennessee, Utah and Virginia — made the top grade. They earned an “A” because in those states, high school graduates in the class of 2023 were required to have taken a personal finance course before graduation. 

By 2028, when new laws and policy changes are fully implemented, 23 states are projected to earn an “A,” according to the report.

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Here’s a look at more stories on how to manage, grow and protect your money for the years ahead.

‘Not a day will go by that you don’t think about money’

In the next five years, more than 4 out of 10 high school students in the U.S. will be enrolled in high schools where a personal finance course will be required before graduating.
They will be learning lifelong lessons. 
“Once you graduate from high school, not a day will go by that you don’t think about money, how to make it, how to spend it, how to save it. You will be thinking about this until the day you die,” said John Pelletier, director of Champlain College’s Center for Financial Literacy. 

Although some schools and school districts have mandated students receive financial education, experts say the recent increase in the number of states that now guarantee high school students will take a financial literacy course before they graduate is partly due to the Covid-19 pandemic, which underscored the financial fragility of many Americans.  

“If you leave it up to local control, the districts most likely to unilaterally do this locally, they’re white, and they’re rich. So you would argue the folks that need it the most are the least likely to get it unless the state requires everyone gets it,” Pelletier said. 
Studies show personal finance education can make a significant difference in young adults’ financial behaviors, from improving credit scores and lowering loan delinquency rates to reducing payday lending and helping students make better decisions about college loans.

A few states still have ‘virtually no requirements’

Meanwhile, four states — California, Connecticut, Massachusetts and South Dakota — as well as Washington, D.C., got failing grades, receiving “F”s in this report because they have “virtually no requirements” for personal finance education in high school. Still, advocates in “failing” states, such as California, are working to change the laws to ensure students are guaranteed financial education. 

“We are currently collecting signatures in support of financial education for all high schoolers,” said California resident Tim Ranzetta, co-founder of Next Gen Personal Finance, a financial literacy advocacy organization. “We are far outpacing our estimates, demonstrating what we all inherently know: that personal finance is an impactful and easy-to-implement course with strong demand from both students, parents and the general public.”
The momentum for guaranteeing students receive personal finance education is gaining steam in other states, too.
Wisconsin could soon become the 24th state on track to earn an “A” grade from the Center for Financial Literacy. This week, the governor of Wisconsin is expected to take action on a bill requiring a personal financial literacy course for high school graduation.
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Your Money

Gen Z women are driving spending trends on TikTok.
A larger share of Gen Z women, 75%, use TikTok compared to their male counterparts, 62%, according to a report by Morning Consult.
“TikTok is a Gen Z women-centric app, and it is setting the tone and the narrative for what is ‘hot’ online,” said Ellyn Briggs, a brands analyst at Morning Consult.

Young people using cellphones.
Filippobacci | E+ | Getty Images

Gen Z women are driving spending trends on TikTok.
Women in their 20s spend more time on the short-form video app than male peers of their generation, and it’s exposing them to a financial risk.

“TikTok is a Gen Z women-centric app, and it is setting the tone and the narrative for what is ‘hot’ online,” said Ellyn Briggs, a brands analyst at Morning Consult.
The issue: More time on the app drives increased connection to influencers, online figures who create aspirational content that resonates with their viewers.

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Here’s a look at more coverage in CNBC’s Women & Wealth special report, where we explore ways women can increase income, save and make the most of opportunities.

Many influencers post “haul” videos showing products they recently purchased, often from a specific brand. Their ability to spend can be misleading, experts say. Although the influencers are often within the same age group as their audience, many earn a high income from their platforms and brand deals or receive free products.
“The bigger conversation is just how impactful our digital lives are on our real lives,” said Briggs. “TikTok is driving consumption patterns in a very real way.”
TikTok has significant influence on how the young generation spends its money, with #TikTokmademebuyit garnering more than eight billion views, Morning Consult found in February. A larger share of Gen Z women, 75%, use TikTok compared to their male counterparts, 62%, a separate Morning Consult report found.

Social media is Gen Z’s ‘keeping up with the Joneses’

In a way, social media is “the current, younger generation’s version of keeping up with the Joneses,” said certified financial planner Shaun Williams, partner and private wealth advisor of Paragon Capital Management based in Denver. The firm is ranked No. 57 on the 2023 CNBC FA 100 list.
Baby boomers were able to keep up with “the Joneses” because the generation often primarily saw shopping habits from socioeconomic peers in their neighborhood, Williams said. 

Stay out of credit card debt. It’s so much easier to get started on the other things if you’re not starting in a hole.

Sophia Bera Daigle
certified financial planner

Social media platforms such as TikTok take the concept to a different level, especially for Gen Z. It’s easy to be overpowered by FOMO, or the fear of missing out, despite economic pressures such as a high cost of living.
Nonmortgage debt among Gen Zers rose 99.3% between March 2021 and the first quarter of 2023, according to LendingTree. Younger consumers’ debt added up to an average of $10,797. The age group’s balances spiked for personal loans and credit card balances, rising $1,292 and $1,771, respectively.
The site analyzed more than 150,000 anonymized credit reports from the first quarter of 2023 and 87,000 from March 2021.
The best thing someone in their 20s can do for themselves is to “stay out of credit card debt,” said Sophia Bera Daigle, a CFP and the founder of Gen Y Planning in Austin, Texas.
“It’s so much easier to get started on the other things if you’re not starting in a hole,” Daigle said, who is a member of the CNBC FA Council.

Two money guardrails for women in their 20s

Experts say it’s important for young women in their 20s to remember the following two things when it comes to observing their contemporaries exhibiting expensive lifestyles:
1. Signs of wealth can be misleading
Someone who shows their wealth in what they own or wear only shows you what they spent, not what they have invested or saved.
“When you see signs of wealth, that is not someone who’s wealthy: It’s spent, it’s gone,” said Williams.
Additionally, you have no way of knowing how people on the internet are affording their lifestyles.
Influencers on TikTok, Instagram and other platforms may be sponsored by private companies to get others to buy into the products or experiences. “They’re not actually always spending their own money” on the items they promote, Williams said, no matter how they finance the rest of their lifestyle.

2. Think of your long-term plans
Women can have a tougher time getting ahead financially because of hurdles such as the wage gap. In 2022, women earned 78 cents for every dollar men made, according to the National Partnership for Women and Families.
While social media can entice people to spend beyond their means, you might find that it helps to remind yourself of more powerful ways to use that money, whether that is investing in a retirement account, building emergency savings or preparing for other goals, Daigle said.
“Laying the groundwork in your 20s is wonderful so that in your 30s, you can really turbocharge your financial goals,” she said.Don’t miss these stories from CNBC PRO: More

Some of the largest money market funds are paying over 5%, and investors could see a higher tax bill in April.
However, investors may consider other options like Treasury bills or municipal money market funds to save on future taxes.

Eric Audras | PhotoAlto Agency RF Collections | Getty Images

If you’ve poured cash into money market mutual funds, you could see a higher 2023 tax bill in April. But other investments could reduce your 2024 taxes, experts say.
Investors and institutions have funneled cash into money market funds amid rising interest rates, and balances reached $5.84 trillion as of Nov. 29, the Investment Company Institute reported. Meanwhile, some of the largest money market funds are now paying close to 5.5%, as of Dec. 4, according to Crane Data.

Money market fund yields are higher than any year since the Great Recession, said certified financial planner Seth Mullikin, founder of Lattice Financial in Charlotte, North Carolina. “For most investors, this will be taxable income,” he said.
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Investors typically owe regular income taxes on earnings from money market mutual funds or high-yield savings accounts, with top marginal rates of 37% for assets held in a brokerage account. By comparison, the highest long-term capital gains rate is 20%.

Plus, boosting your income can have other financial consequences, such as higher premiums for Medicare Part B and D, known as the income-related monthly adjustment amount, or IRMAA, Mullikin said.
“While any additional income earned from higher yields is taxed at a progressively higher rate, IRMAA applies as a surcharge,” he said. “This means that even $1 of additional income could trigger higher premiums.”

However, other investment options could help minimize the tax burden, financial experts say.

Tax-friendly options for cash

If you have a sizable amount of cash, you may consider Treasury bills, according to Catherine Valega, a CFP with Green Bee Advisory in the greater Boston area.
With terms ranging from one month to one year, most Treasury bills, known as T-bills, are currently paying well over 5%, as of Dec. 4. You can buy T-bills through TreasuryDirect or a brokerage account.
However, T-bills offer a tax benefit over products like high-yield savings, certificates of deposit or money market funds: no state or local taxes on earnings. T-bill interest is still subject to federal income taxes.  

Another option is tax-exempt municipal money market funds, according to Kirk Hackbarth, a CFP and wealth advisor at JMG Financial Group in Milwaukee. He is also a certified public accountant. 
Municipal bonds typically invest in assets issued by municipalities, such as state and local governments, and investors generally avoid federal income taxes on earnings. Some of the biggest tax-exempt money market funds are paying around 3.5%, as of Dec. 4, according to Crane Data.
“Investors in a higher marginal income tax bracket should consider municipal money market mutual funds,” Hackbarth said. “The after-tax yield can be higher.”
However, the best option for cash ultimately depends on your risk tolerance and goals, experts say.
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The new federal college financial aid application will roll out on or before the last day of the year.
The simplified FAFSA is meant to improve access, but the delay has caused confusion and irritation, experts say.
Here’s what you can do now to avoid additional problems.

For many families, financial aid is key when it comes to paying for college.
But students must first fill out the Free Application for Federal Student Aid to access any assistance. And this year, the FAFSA has been significantly delayed.

For the 2024-2025 school year, a new, streamlined FAFSA form will be available on or before Dec. 31, 2023, up to nearly three months later than in previous years. The Education Department said it plans to return to an Oct. 1 start date next year.
“The irony is they are changing the FAFSA to make it simpler and easier but in doing that, you’ve created a problem,” said Mary Morris, CEO of Virginia529, one of the largest 529 plans in the country. For families trying to navigate the process, a new formula and the delay are “intimidating and scary and annoying.”
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The FAFSA serves as the gateway to all federal aid money, including loans, work study and grants. Grants are the most desirable kinds of assistance because they typically do not need to be repaid.
In ordinary years, high school graduates miss out on billions in federal grants because they don’t fill out the FAFSA. 

Many families mistakenly assume they won’t qualify for financial aid and don’t even bother to apply. Others say a lengthy and overly complicated application is a major hurdle.
The plan to simplify the FAFSA has been years in the making. In 2020, the Consolidated Appropriations Act was passed to streamline the process. Those changes are finally going into effect.

Why it’s important to file the FAFSA early

Despite the delay, it’s still advantageous for students to file the FAFSA as soon as they can, according to Rick Castellano, a spokesperson for Sallie Mae.
The earlier families fill out the form, the better their chances are of receiving aid, since some financial aid is awarded on a first-come, first-served basis, or from programs with limited funds.
It’s possible there will be technical issues when the new form finally becomes available online, particularly if there is a surge in traffic to the site, Castellano said. However, that shouldn’t prevent families from completing the FAFSA in the days that follow, he added.
“While there may be some hiccups along the way, students and families should do what they need to do to file as soon as possible,” he said.

What’s changed with the new FAFSA

Not only has the timing changed but the simplified form now also uses a calculation called the “Student Aid Index” to estimate how much a family can afford to pay.
Historically, many factors, not just income, go into how much aid students receive, including the total number of people in the household and the number of children in college, as well as other financial commitments such as a home equity loan or child support payments.
Now, the formula will pull federal tax information directly from the IRS and slims 108 questions down to less than 50.

Going forward, the Department of Education will no longer give families a break for having multiple children in college at the same time, effectively eliminating the “sibling discount.”
“The elimination of the multiple student adjustment is one of the many tectonic changes under FAFSA simplification that will take full effect beginning with the 2024-2025 academic year,” Kalman Chany, a financial aid consultant and author of The Princeton Review’s “Paying for College,” recently told CNBC. 
Up until now, “the multiple student adjustment has been the single most important data element affecting one’s eligibility for federal student aid,” Chany said.
At the same time, the new FAFSA will raise the family income threshold, making more students eligible for federal need-based aid.

More than half a million additional students will qualify for a Pell Grant, a type of aid available to low-income families, according to higher education expert Mark Kantrowitz. And of those that qualify, more than 1.5 million will qualify for the maximum amount.
Currently, the maximum Pell Grant award is $7,395.
Under the new system, more students will have access to federal grants, but some — likely wealthier — students will miss out on the sibling discount, according to Kantrowitz.

What students can do now to get ready

For students who feel pressured by having to submit college applications without knowing how much the schools will cost them, the Federal Student Aid Estimator can provide an early estimate of what a student’s federal aid could be after submitting the new form.
To facilitate the student aid calculations, “get your financial house in order,” Virginia529′s Morris advised. Students and families should have their tax forms ready and create a StudentAid.gov account along with a Federal Student Aid ID, which is needed to input and access your information online.
Then, follow Federal Student Aid on social media for upcoming announcements, including an alert when the new FAFSA form is available to complete.
This is also a good time to consider other sources for merit-based aid, Morris added, by searching websites such as Scholarships.com and the College Board.
There are more than 1.7 million private scholarships and fellowships available, often funded by foundations, corporations and other independent organizations, with a total value of more than $7.4 billion, according to Kantrowitz.
Finally, there are plenty of free resources to help guide families through the updated FAFSA process. “Know that there is assistance out there, and just don’t give up,” Morris said. “It will be worth it in the long run.”
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