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By Hiranmayi Srinivasan, Associate Editor

What's Happening Today

As inflation makes most goods and services more expensive, many of us are relying more on credit cards, evidenced by soaring credit card debt in the second quarter of 2022, according to the Federal Reserve Bank of New York's recent quarterly report on household debt and credit.

The report found credit card debt climbed by $46 billion last quarter, rising 13% from the same period last year—the biggest annual jump in credit card balances in more than 20 years.

It's important to note that borrowing on your credit card is more expensive right now, as credit card annual percentage rates (APRs) rise as the Federal Reserve raises the federal funds rate in an effort to bring inflation down. Data collected by The Balance shows the average credit card interest rate hit 21.33% in July, the highest rate seen in more than two years.

If you pay your credit card bill on time every month, you won't have to worry about a higher penalty interest rate. However, card balances can grow quickly, and even small increases to a card's interest rate can add up to higher debt costs if you fall behind on monthly payments.

Minutes from the Fed's last policy meeting in July suggested rate hikes might be less aggressive in the coming months as inflation has shown signs of easing. But prices (and interest rates) remain high, and it's still too soon to tell when prices will come down. So this could be a good time to pay down any credit card debt you might already have, and avoid taking on extra debt.

- Hira

Editors' Picks

Laid Off? Unemployment Checks Aren't What They Once Were (The Balance)

'Housing Recession' Drove Prices Lower in July (The Balance)

Layoffs Are in the Works at Half of Companies, PwC Survey Shows (Bloomberg)

How Can I Fight Against Inflation? (The Balance)

What Is a Good APR for a Credit Card? (The Balance)

Fresh Start Student Loan Plan Could Lift 7.5 Million Borrowers out of Default (The Washington Post)

How To Talk to Your Mom About Retiring Alone (The Balance)

Term of the Day

Health Care Proxy

A health care proxy authorizes someone to make medical decisions for you if you become incapacitated. You can choose almost any adult you trust as your health care proxy, even if they're not a family member.

Typically, a health care proxy contains instructions that say the document becomes effective if a doctor has determined you don't have the mental capacity to make decisions.

Even if you're young and don't have medical issues, it's a smart move to designate a health care proxy for a worst-case scenario. Think about who you'd want to speak for you if you weren't able to. Also consider whether the person can make difficult decisions quickly and if you think they'd ask questions and seek clarification from health care providers to make sure your wishes are followed.

Off the Charts

If you got laid off in 2020 or early 2021, you might have had a stronger-than-usual unemployment safety net there to support you until you found your next job. If it happened now, though? You might be on your own.

Not only are the pandemic-era expansions to unemployment programs long gone, but high inflation this year means the standard benefits won't go as far. A growing number of states have actually cut or are moving to slash the time you can collect benefits, or the amount of money they give, to below pre-pandemic levels.