Credit card debt has become a widespread issue in the United States, affecting millions of Americans daily. A recent survey conducted by Bankrate found that nearly two-thirds of credit card debtors have delayed or avoided other financial decisions because of their debt, demonstrating the significant impact it has on their lives. The survey aimed to understand how Americans are affected by their credit card debt, and the results revealed some surprising insights. According to Bankrate senior industry analyst Ted Rossman, the goal was to “get a little deeper under the hood” and explore the day-to-day effects of credit card debt on households. One of the key findings was that about half of credit card holders carry debt from month to month, which Rossman referred to as a “kitchen table economics issue” affecting many households. This debt can lead to delayed financial decisions, such as not creating an emergency savings fund, delaying investments, and putting off large purchases like a car or a house.
- Gen Xers have the most credit card debt, but it’s younger people who are more likely to cut back on things as a result.
- Millennials and Gen Zers are facing more “household formation costs,” such as getting married, having kids, or buying or renting their own home.
- Credit card debt often tracks back to the higher cost of living over the last several years.
Rossman emphasized that credit card debt is not typically caused by frivolous spending, but rather by emergency expenses or day-to-day costs. He said, “Contrary to some of what you might hear, people don’t usually get into credit card debt for frivolous reasons. It’s usually either an emergency expense… and then No. 2 is just day-to-day expenses.”
- Credit card balances fell 17% from the end of 2019 to the beginning of 2021 as people spent less and had more money coming in from government stimulus checks.
- Credit card balances are now 57% higher than they were four years ago, according to data from the New York Fed.
- The average credit card rate is around 20%, typically a household’s highest-cost debt.
The survey also found that credit card debt is impacting people’s daily lives in significant ways. For example, 64% of credit card debtors have delayed or avoided other financial decisions because of their debt. This includes not creating an emergency savings fund, delaying investments, and putting off large purchases.
| Financial Impact | Percentage of Credit Card Debtors |
|---|---|
| Avoiding investments | About a quarter (25%) |
| Delaying a car purchase | Around the same share (20%) |
| Delaying spending on healthcare and wellness | Over a third (33%) |
Rossman noted that he was surprised by the number of credit card debtors who are putting off self-care via health and wellness spending. Bankrate’s survey found that 13% of credit card debtors have delayed buying a house. “Still love the 0% balance-transfer card approach,” Rossman said, highlighting the option as a way to pause interest payments for up to 21 months. “You’ll need to pay off the debt in that two-year window if you want to avoid interest payments.”
Nonprofit credit counseling is another good option, especially for those with lower credit scores or significant debt, Rossman said. He mentioned that organizations like the National Foundation for Credit Counseling and the Financial Counseling Association of America offer assistance. A recent increase in demand for financial counseling was driven by young adults, with many seeking help managing their debt. Rossman emphasized the importance of seeking help and providing support to those struggling with credit card debt.
“The growing need for financial counseling was driven by young adults. MMI saw 48% annual growth in clients in their 20s.
As Rossman noted, the key to overcoming credit card debt is to take action and make a plan. He emphasized that paying down credit card debt takes more care and attention than other personal finance efforts, such as building up savings. If you find yourself in debt, Rossman advised seeking out options like a 0% balance-transfer card or nonprofit credit counseling. With the right support, it is possible to overcome credit card debt and achieve financial stability. Examples of Financial Impact
* 64% of credit card debtors have delayed or avoided other financial decisions because of their debt. * About a third of credit card debtors have delayed spending on healthcare and wellness combined. * 13% of credit card debtors have delayed buying a house. By understanding the hidden consequences of credit card debt, individuals can take proactive steps to manage their debt and achieve financial stability. It’s essential to recognize the impact of credit card debt on daily life and to seek help when needed. With the right resources and support, anyone can overcome credit card debt and build a stronger financial future.
Key Takeaways
* Nearly two-thirds of credit card debtors have delayed or avoided other financial decisions because of their debt. * About half of credit card holders carry debt from month to month. * Gen Xers have the most credit card debt, but younger people are more likely to cut back on things as a result. * Credit card debt often tracks back to the higher cost of living over the last several years. * The average credit card rate is around 20%, typically a household’s highest-cost debt. * Nonprofit credit counseling is a good option for those struggling with credit card debt.
Final Thoughts
Credit card debt has become a pervasive issue in the United States, affecting millions of Americans daily. As Rossman emphasized, “The key to overcoming credit card debt is to take action and make a plan.” With the right resources and support, anyone can overcome credit card debt and build a stronger financial future.
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