A recent survey conducted by Bankrate reveals that one in three Americans have more credit card debt than savings in both 2023 and 2024. This highlights the prevalence of credit card debt as a financial challenge faced by many individuals in the United States.
Despite a cooling inflation rate and a strong job market, Americans continue to struggle with credit card payments. At the end of 2023, credit card balances reached a record high of over $1 trillion, according to the Federal Reserve Bank of New York.
Wilbert van der Klaauw, an economic research advisor at the New York Fed, stated in a news release earlier this month that credit card and auto loan delinquencies are still rising above pre-pandemic levels. This indicates an increase in financial stress, especially among younger and lower-income households.
A recent Bankrate survey further reveals that approximately 36% of U.S. adults reported having more credit card debt than emergency savings. This discrepancy between debt and savings is more evident among Millennials and Gen Xers compared to other generations.
In response to the increasing cost of carrying debt and insufficient emergency savings, more Americans are prioritizing both paying down debt and increasing emergency savings simultaneously. Bankrate’s Chief Financial Analyst, Greg McBride, emphasizes the importance of focusing on both aspects rather than excluding one in favor of the other.
The average American household owes $7,951 in credit card debt annually, based on 2022 data from the Federal Reserve Bank of New York and the U.S. Census Bureau.
Furthermore, credit card balances experienced a 4.6% increase, roughly $50 billion, in the fourth quarter of 2023. Credit card delinquencies, which indicate the duration for which cardholders fall behind in making payments, also saw an increase.
While the U.S. economy remains steady overall, certain areas show that Americans are overextended. Factors such as higher prices for food, gas, and housing contribute to the accumulation of credit card debt.
Among different generations, Generation X has the highest average credit card balances. Although every generation experienced an increase in debt between 2021 and 2022, the silent generation added the least. According to Bankrate, the average credit card debt owed by each generation is as follows: Generation X ($8,134), Baby boomers ($6,245), Millennials ($5,649), the Silent generation ($3,316), and Generation Z ($2,854).
It is crucial for individuals to address their credit card debt and work towards reducing it. By taking steps to pay off their balances and increase emergency savings, Americans can alleviate financial stress and work towards a more secure financial future.
In conclusion, the prevalence of credit card debt among Americans is a significant financial concern. As more individuals prioritize debt repayment and emergency savings, it is hoped that the burden of credit card debt will gradually decrease, leading to improved financial stability for individuals and households.
