Understanding the American Credit Card Debt Situation

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Credit Card Debt

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There are always two sides to every coin. While the business fraternity may exalt that the American economy is taking small and uncertain strides towards the slowest recovery in the history of America because of job killing regulations and because consumers are spending a little more, there is another group of analysts and researchers who are frowning because the consumers are borrowing to finance their buys. This is possibly because their wages are stagnant; they do not have confidence in the future like they used to; and because their drive for material wealth supersedes financial logic. In fact, they are borrowing so heavily that their financial future looks bleak.

The American credit card debt situation has become a cause for concern.

The American Credit Card Debt Situation

A recent study, updated in February of 2013, has unveiled some disturbing facts about the American credit card debt situation. According to the findings from this study, the average credit card debt in a U.S. household is $15,266. Americans in total have assimilated a whopping $850.9 billion in credit card debt, making it the third largest form of indebtedness of an average American household.

A study of the patterns of the American credit card debt has thrown up some quite interesting and unexpected findings. Contrary to popular belief, it is not the couple in their mid-30s with kids and mortgages who has the highest credit card debt. Rather older Americans and those in their late 20s and early 30s rake up some of the largest amounts of credit card debt. This curious piece of fact merits a more detailed discussion.

Credit Card Debt for Older Americans

According to a study conducted by Demos, a policy research organization in New York, on behalf of AARP, Americans aged more than 50 years and belonging to the low- and middle-income bracket had an average credit card debt of $8,278 during the year 2012.

It is believed that elderly Americans pile up large amounts of debt on their credit cards mainly because 34 percent of Americans above the age of 50 tend to use these cards to pay for essential items like groceries and utilities and to fund mortgage payments. The study also found that about half of the individuals in this age group use their credit cards to pay for their prescription drugs and dental care costs. About the same percentage of people above 50 years of age use their credit cards to fund automobile repairs while 38 percent use these to pay for house repairs.

According to Gail Cunningham, Vice President, National Foundation for Credit Counseling, the recent recession and the currently economic doldrums have squeezed the savings of many elderly Americans and with reduced means of earning an income in a slow economy and a recession if you abide by the unemployment numbers alone, they has been no other way to make ends meet other than to pay the bills with their credit cards. Almost 25 percent of the elderly Americans who were interviewed during the Demos study, said that job losses and the consequent inability to secure another job had triggered off their credit card debts.

This is the Baby Boomer generation who seems to be magnets at attracting debts. According to the findings by the Employee Benefit Research Institute in Washington, the average debt of Americans over 55 years of age during the period from 1992 to 2007 was more than $70,000. It seems their financial woes had started even before the recession and they have certainly not found it easy to improve their financial situation, let alone save to accumulate a tidy nest egg for their sunset years.

Credit Card Debt for Younger Folks

According to the findings of a study published in an online resource of Reuters, younger Americans are currently battling with larger amounts of credit card debts than older people. According to this research, American credit card owners in their late 20s and early 30s (more specifically, people who were born during the period 1980-1984) have on an average $5,689 more in debt than their parents and $8,156 more than their grandparents, when they were at this age. The research also laid bare a disturbing fact-younger Americans tend to repay more slowly (the payoff rates being 24 and 77 points lower than that of their parents and grandparents respectively) and they are at huge risks of accumulating more debts (and thus jeopardizing their financial future) if they don’t amend their spending ways. In fact, they even risk dying with their dues unpaid.

Why would spend so much money on a humanities or psychology degree that means not much in the outside world?

Just out of college, not yet landed a job, and probably burdened with a student loan to repay. Although these demographic details of many young Americans in their late 20s and early 30s seem to explain their high amounts of credit card debts, the findings still are disconcerting.

Credit Card Debts for All

The above-mentioned bits of information about the burgeoning credit card debts of younger and older Americans however, skim just the surface of the actual debt situation. In reality, credit card debts have hit people of all income groups across the U.S. According to the findings of a survey among diverse income-earning groups, about a quarter of people from almost all income groups have more credit card debts than money in their banks. For instance, 23 percent of the people earning more than $75,000 a year had more debt than savings while this number is 30 percent for those who earn between $30,000, and $49,900 a year. About 23 percent of those who earned less than $30,000 annually and about 25 percent of people with annual incomes between $50,000 and $74,900 had accumulated more credit card debt than they can repay with their savings.

Too many Americans are buying cars and homes they cannot afford. This is not big or fraudulent government at fault, a foreign dictator, or Hollywood for that matter, these are just illogical personal financial choices.

Those were a lot of numbers but you really do not need to do much number-crunching to realize the gravity of the American debt situation. Although many Americans have cut down on their expenditures post-recession and many more have adopted frugal lifestyles so that they steer clear off more debt, the situation is grim. However, their efforts are commendable and they must realize that they must carry on with these efforts to improve their financial situations and eventually become debt-free.

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About Author

Benjamin is from Sacramento, CA. He has 2 master’s degrees and served 4 years in the U.S. Navy. He has worked at Wells Fargo Financial and has been investing in equities since 1995. He is a constant reader of finance articles and books related to business.


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CREDIT DAD is an independent, advertising-supported website. Many debit cards, credit cards and other financial offers that appear here are from companies from which CREDIT DAD Websites receive compensation. This compensation may impact how and where products appear on this website (including, for example, the order in which they appear). CREDIT DAD Websites do not include all card offers in the marketplace.