More cardholders are carrying more credit card debt than ever before, and they’re paying a steep price for the privilege, a Bankrate survey on credit card debt finds. According to new data, 47% of credit cardholders currently carry debt from month to month — up slightly from 46% in December 2022 and 39% in December 2021.
While emergency expenses are the prime culprit, consumers are also hard pressed to chip away at the debt in today’s high interest rate environment. According to the Federal Reserve Bank of New York, credit card debt was at $986 billion at the end of March, up $145 billion from the first quarter of 2022.
Inflation, which has moderated after reaching a 40-year high of 9.1% in June last year, has pushed up the costs of the goods and services, while — at the same time — the Fed has raised its target interest rate past 5% through a series of rate hikes. This has taken average credit card interest rates north of 20%, making it more difficult for Americans that carry a balance from month to month to chip away at their debt.
More people carrying over card balances
Many cardholders from all age and income groups are carrying over credit card balances, with 47% saying they do so — up from 39% in December 2021 — the survey (carried out in July) finds. Agewise, 53% of Gen Xers carryover card balances from month to month. Next were Gen Z consumers (52%) followed by millennials, (49%) and baby boomers (41%).
Although credit card debt is found across all income groups, more lower-income households carry card balances. While 38% of cardholders with annual household incomes of $100,000 or more carry credit card debt, 44% of those with annual household incomes in the $80,000 to $99,999 do so. This rises to 48% for those with annual household incomes between $50,000 and $79,999 and 53% for cardholders with annual household incomes below $50,000.
Card balances linger for months
Those carrying card balances have also been rolling them over for months, with 60% being in credit card debt for a year or more — the same as in August 2022, but up from 50% in September 2021.
Higher income households’ credit card debt has been more sticky, with 72% of respondents with annual household incomes of $100,000 and more having been in debt for at least a year. That falls to 70% for those with annual household incomes between $80,000 and $99,999, 63% in the case of respondents with annual household incomes between $50,000 and $79,999 and 53% for respondents with annual household incomes under $50,000.
Breaking it down by age group, more millennials have carried their debt for a year or more (68%) than other age groups. Generation X, the so-called “sandwich generation,” follows (62%). Fifty-nine percent of baby boomers and 39% of Gen Zers with credit card debt have had it for at least a year.
Emergency expenses are the prime culprit
The main reason cited for carrying credit card debt is emergency expenses, the survey finds. Of those battling credit card debt, 43% say that it’s because of an unexpected or emergency expense they had to tackle (down from 46% for August 2022). Car repairs and medical bills were each cited by 10% of the respondents, followed by home repairs (8%) and other unexpected expenses (about 14%).
People also took on credit card debt to tackle their everyday expenses, with 25% citing this reason, up from 24% last August.
Tips for reducing credit card debt
While it’s said that there’s no such thing as a free lunch, you can get some relief from high credit card rates by opting for a 0% balance transfer card. Though you may pay initial balance transfer fees, Bankrate’s Rossman says, “These allow you to avoid interest for up to 21 months. That’s a tremendous tailwind that can power your debt payoff journey.”
Credit card rates can be four to five times higher than rates on other common financial products. That’s a good reason to sign up for a 0% balance transfer card. Other ways to tackle debt include:
—Contacting a reputable nonprofit credit counseling agency, such as Money Management International
—Taking on a side hustle to generate extra income
—Selling items you no longer need
—Reducing unnecessary expenses
Rossman notes that it’s important to prioritize credit card debt pay off, considering that if you only make minimum payments on an average balance at the average interest rate, it may take decades to plough your way out of the debt. He advises, “Attack this debt and get credit cards working for you, rather than the other way around.”
Methodology
This survey was conducted using an online email interview administered to members of the YouGov Plc panel of individuals who have agreed to take part in surveys. All figures, unless otherwise stated, are from YouGov. Total sample size was 2,486 adults, among whom 1,919 were cardholders and 891 carry a balance month to month. Fieldwork was undertaken between July 6 and July 10, 2023. The figures have been weighted and are representative of all U.S. adults (ages 18+).
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