INDIANAPOLIS (WISH) — According to the Federal Reserve Bank of New York, American credit card debt has surged to an all-time high of $1.14 trillion. In parallel, the Consumer Financial Protection Bureau reports that credit card companies generated an estimated $25 billion in interest revenue last year.

Ayelet Sheffey, senior economic policy reporter for Business Insider, explains that the increasing profitability of credit card companies is closely tied to the record high balances consumers are carrying. “The average interest rate on credit cards in the U.S. is now over 21 percent, driven by the elevated rates that companies are charging,” she noted.

Sheffey highlights that the gap between the federal funds rate and the rates credit card companies pay is currently the widest it has been in 30 years. “This allows credit card companies to set their rates independently of the Federal Reserve’s interest rate adjustments,” she said.

Sheffey also points out that while credit card companies promote attractive rewards and travel perks, they often downplay the impact of high interest rates. “Consumers need to be aware of the potential costs associated with falling behind on payments,” she cautioned.

To manage debt effectively, Sheffey recommends tracking spending and understanding interest rates. She suggests strategies like the “debt snowball,” which involves paying off smaller balances first, as well as considering debt consolidation to simplify payments at a single interest rate. “There are numerous options available to help consumers navigate their debt,” she added.