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Credit Card Debt In America 2021

College Students And Credit Card Debt

Study: Consumers credit card balances will rise in 2021 following debt decline in 2020

Young Americans tend to have the least amount of credit card debt of all generations, but they also tend to have less income than older generations. This means a few small purchases can become expensive financial burdens as interest payments grow month over month.

Smart spending early in life can have significant benefits for future financial health. Debt can become a cycle as monthly repayments make it difficult to save, so emergency expenses or even lifestyle costs encourage individuals to continue relying on credit.

When students cover their necessary expenses with credit cards and pay off the complete balance each month, they benefit from improved and credit card rewards without overpaying on interest.

The difference between these two scenarios is intentional spending and proper budgeting. You should know how much you can afford to spend each month and limit your credit use accordingly.

College students who have already accumulated credit card debt should prioritize repayment before they graduate and are faced with student loan repayment, too.

Why Should You Trust Elitepersonalfinance

With accuracy and accountability in mind, we pride ourselves on presenting you with the latest information from the most reliable sources. We carefully select data from the largest credit reporting agencies â like FICO, Equifax, Experian, and TransUnion. In addition, we augment our studies with relevant data from the U.S. government, the U.S. Federal Reserve , the Consumer Financial Protection Bureau , and other reputable research institutions.

Moreover, our editorial team carefully vets all of the findings, and sources are present throughout the study.

Whats The Average Interest Rate On Peoples Credit Cards What About Those Who Carry A Balance What About New Credit Card Offers

For all credit cards, the average APR in the first quarter of 2022 was 15.13%.

For cards accruing interest, the average in the first quarter of 2022 was 16.65%.

For new credit card offers, the average today was 20.82% the highest rate weve seen since August 2019.

Average APRs for current credit card accounts and new card offers
Average APR for new credit card offers 20.82%
22.22%

Of course, your best move is to make those interest rates a moot point by paying your card debt in full, but thats often easier said than done.

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American Credit Card Usage Statistics

  • Americans are 40% likely to use a credit card when making a purchase.
  • Only 36.2% of American cardholders use their cards on a monthly basis.
  • Around 23.8% of American cardholders dont use their cards despite having an account open.
  • Roughly 40.1% of American cardholders dont use their credit cards for transactions but do carry a balance on those accounts.
  • According to a survey by BMO Harris Bank, 14% of men and 10% of women claim they pay off their credit card balance each month.
  • 60% of Americans believe the US will become a cashless society soon.
  • How many credit cards are in American wallets?

  • The number of credit card accounts open in the United States is 537,110,000. This is an all time high for the United States.
  • The average American owns 3 credit cards.
  • 83% of Americans own at least one credit card.
  • 14% of Americans own at least 10 credit cards.
  • Generation Z owns the lowest average number of cards at 1.4.
  • 87% of white adults, 90% of Asian adults, 72% of Black adults and 76% of Hispanic adults own credit cards.
  • The usage of credit cards as a form of payment has increased since 2016, growing to 27% of all payments by the end of 2020.
  • The top three credit card issuers in the U.S. are American Express, Chase and Citi.
  • Mastercard is the most popular credit card network with 551 million cards in circulation the world over. Debit cards remain the most frequently used form of payment at 28% share of payments.
  • U.S. cardholders are using a small portion of their available credit

    As Americans Spend Credit Card Debt Is Ticking Back Up

    Credit Card Debt In America : Average Credit Card Debt In America 2021 ...

    Mastercard Inc. credit cards are displayed in this picture illustration taken December 8, 2017. REUTERS/Benoit Tessier/Illustration/File Photo

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    NEW YORK, Sept 27 – Early in the pandemic, there were encouraging and surprising signs about the decline of credit card debt.

    Now, that trendline seems to be changing.

    Many Americans stayed at home at the start of COVID-19 and did not spend like they usually do. They also received several rounds of emergency cash assistance, helping to chop away at those credit-card bills, at least temporarily.

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    Spending is ticking back up and the results are starting to show up on our monthly statements.

    In fact, 42% of those with credit card debt, or 59 million Americans, say they have added to their balances since the beginning of the pandemic, according to a new study by personal finance site Bankrate.com.

    “Things are better for some, but they are not better for everybody,” explains Ted Rossman, Bankrates senior industry analyst.

    The end of stimulus checks, expanded unemployment benefits and the eviction moratorium does not bode well for debt management, Rossman added.

    Also headed north were auto loans, by $33 billion in the quarter, and mortgage debt, by $282 billion. All told it makes for total household debt of $14.96 trillion, a quarterly rise of 2.1%.

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    What Consumers Can Do

    The pandemic isnt over, and neither is its financial impact on millions of Americans. If treading water financially right now is all thats possible for you, thats understandable. But if you have more breathing room, there are some steps you can take toward getting your finances back on track.

    Adjust your budget. While the pandemic continues, the relief programs have mostly ended, with the automatic forbearance on federal student loans ending in a few months. If you havent yet revisited your budget to account for such changes, do it now. Figure out whether your income can reasonably cover your expenses going forward. If not, aim to make cuts to your expenses or seek out programs to help you balance your budget. This may mean switching your federal student loan payments to an income-based repayment plan or seeking COVID-related mortgage forbearance.

    If youre getting out of the house more now than before, its tempting to spend on all the things you denied yourself over the past 18 months, Rathner says. Its OK to treat yourself, but create a spending plan first. Make space in your budget not just for savings, debt repayment and necessary expenses, but also for fun. That can help you stay on track without feeling like you have to deprive yourself.

    How Many Americans Are Debt

    Approximately 80% of all American adults have a debt of some sort. The types of debts vary by generation, with Baby Boomers having more credit cards, mortgages, medical, and personal loan debt. As a percentage, Millennials have more student loan and personal loan debt than other generations, while Gen Xers lead in automobile debt and unpaid bills.

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    Consider A Balance Transfer Card

    Balance transfer cards may allow you to move higher interest credit card debt to another card with better terms. Some balance transfer cards even come with a 0% introductory annual percentage rate period. This interest-free window could allow you to make payments on your balance without incurring any extra charges.

    That said, balance transfer cards arent for everyone. If you cant repay your debt during the interest-free period, you could face steep interest charges on the remaining balance. In addition, balance transfer cards can come with expensive transfer fees ranging from 3% to 5% of the amount transferred.

    Balance transfer cards may also have credit limit restrictions. Depending on how much debt you have, you may not be able to transfer the entire balance from your existing credit card accounts. With that in mind, take some time to review the terms carefully before signing up for a balance transfer credit card.

    Cost Of Living Growth Has Begun To Outpace Median Incomes

    US Credit Card Debt Rising at Fastest Rate in 22 Years

    Compared with 2011, median household income is up 33%, while the overall cost of living has increased by 21%, according to government data. On the surface, this seems to suggest that income is easily keeping up with expenses, but upon closer inspection, this isnt necessarily the case. Over the past two years, median income has actually gone down decreasing 3% while the overall cost of living has increased by almost 7% in that time frame. And decade-long trends show dramatic growth in two of the biggest living costs: housing and medical expenses.

    The past year and a half was already tough for the millions of Americans who lost jobs It remains difficult for many to catch up.

    Sara Rathner, NerdWallet’s Credit Cards Expert

    While income has grown faster than both of these categories over the span of a decade, it hasnt outpaced either by much, with housing costs growing by 29% and medical expenses growing by 31% during that time.

    The results of NerdWallets survey attest to how the combination of lower incomes and higher costs is affecting the household finances of some Americans. According to the survey, more than a third of Americans say their household financial situation has gotten worse over the past year. When asked why, 38% say their overall household income decreased and 36% say their overall household expenses increased.

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    How Low Minimum Payments May Exploit Behavioral And Cognitive Biases

    Researchers have sought to better understand what leads some card revolvers to make only the minimum payments when doing so leads to protracted indebtedness and interest costs. Some credit card borrowers are slow to pay down their debt because they are cash-constrained. And revolvers at the low ends of the wealth and income spectrums are the ones most likely to need to expand their borrowing in the face of unanticipated expenses or income loss. But many heavy revolvers are not so constrained, at least not all of the time.

    Cognitive and behavioral factors also limit how much and how quickly borrowers repayin some cases, despite strong stated intentions by borrowers to make paying down their debt a priority.28 These factors help explain why mandated disclosures have had little effect on payment behavior.

    The most important behavioral bias appears to be borrowers anchoring to the minimum payment amount that issuers provide and viewing that as a cue to what they ought to pay. Large portions of revolversabout three in 10 of all credit card accounts and as many as half of all card revolversmake monthly debt repayments regularly at or near the minimum payment amount.29 A large portion of payers who were anchoring their payment amounts to the minimum did so even when it was demonstrated that they had sufficient extra liquidity to pay down their card balances more quickly.30

    Average Credit Card Debtby Age Group

    The figures also show that credit card debt tends to peak somewhere around middle age and then declines steadily throughout the later part of consumers’ lifetimes.

    With an average credit card debt of $3,660, cardholders under age 35 carry the lowest amount of credit card debt compared to other generations. For members of that age bracket, the largest source of debt is student loans.

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    Compared With One Year Earlier Credit Card Debt Has Increased At The Fastest Clip In 20 Years

    Americans are borrowing more, but a big part of the increased borrowing is attributable to higher prices, researchers for the New York Fed said in a news release.

    The numbers provide new context for a consumer spending report released by the Bureau of Economic Analysis last week, which showed that spending in June climbed 1.1 percent. Similar to the New York Feds findings, gas prices, which surged past $5 a gallon in many parts of the country in the second quarter, and inflation, which jumped 9.1 percent year over year in June, were the likely drivers of the increased debt.

    A rise in new credit card accounts in the second quarter 233 million marked a high not seen since 2008, according to Tuesdays report. But researchers for the New York Fed noted that delinquency rates for credit card debt is still relatively low. Despite a slight increase, it is still below pre-pandemic numbers. The total outstanding credit card debt rose to $890 billion in the second quarter, a $100 billion increase from the same time last year.

    The report released Tuesday found that household debt increased in the second quarter by $312 billion, or 2 percent, compared with the first quarter. Total balances are now $2 trillion higher than before the pandemic.

    How Much Credit Card Debt Does The Average 40

    30 Credit Card Debt Statistics

    Although more Americans curbed discretionary purchases over the pandemic and have tried to remain thrifty during this current stretch of high inflation many consumers have relied on their to keep up with ever-surging prices in the marketplace.

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    As CNBC reports, first quarter figures from the New York Federal Reserve Bank show that credit card balances increased year-over-year and reached $841 billion. While these were slightly less than heightened 2021 Christmas season numbers, Fed researchers are predicting credit card balances to increase throughout 2022.

    Theres a good chance that Americans total credit card balances will soon reach a new record high, marking a sharp reversal from the precipitous drop that occurred in 2020 and early 2021, claimed CreditCards.com analyst Ted Rossman.

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    Average Credit Card Debt By Race

    People who identified as white reported their families carried an average of $6,940 in credit debt the highest amount of any racial group.

    They were followed by “other” which includes Asians, American Indians and people who identify as multi-racial with an average credit card debt of $6,320. Black households carried the least debt with an average of $3,940, which is 37% lower than the nationwide average.

    What Is The Average Credit Card Debt In America

    If you have credit card debt, you may be wondering how your debt compares with that of other Americans.

    In the third quarter of 2021, the average American had $5,221 of credit card debtâa 2.1% decrease from 2020âs average of $5,315. And thanks to information from the likes of the Federal Reserve and like Experian®, itâs easy to compare credit card debt using a variety of criteria. Read on to learn more about American credit card debt based on location, age and more.

    Key Takeaways

    And if youâre struggling with credit card debt, there are a variety of ways to pay off credit card debt. And there may even be available to you.

    We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.

    Capital One does not provide, endorse or guarantee any third-party product, service, information, or recommendation listed above. The third parties listed are solely responsible for their products and services, and all trademarks listed are the property of their respective owners.

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    Plastic Fantastic: Americans Are Racking Up Credit Card Debt

    United States credit-card balances increased every quarter in 2021, with the fourth-quarter gain the largest in figures dating back 22 years, data shows.

    U.S. credit-card bills jumped sharply last quarter as Americans returned to pre-pandemic spending habits.

    New mortgages reached a historic high last year and auto loans soared, reflecting steep price increases in homes and cars, the regional Fed also said in its quarterly report on household credit and debt.

    As prices of new and used cars have soared, buyers have borrowed larger amounts to finance the extra costs. This will create a longer-term financial burden for households stuck with large loan payments even as prices of used vehicles start coming down from their peaks.

    This is especially a risk for these borrowers who would find themselves owing significantly more on their cars than they are worth if and when used car prices normalize, particularly as the increase in used motor vehicle prices may prove unsustainable, New York Fed economists said in a blog post.

    The U.S. Federal Reserve is poised to increase interest rates this year to help fight decades-high inflation in the country. This will make it harder for Americans to pay down their credit-card debt, according to Ted Rossman, senior industry analyst at Bankrate.com.

    Average Credit Card Balance Down 21%

    Credit card debt on the rise

    The average credit card balance for individuals, as well their average credit limits, fell again in 2021, though neither declined as sharply as they did in 2020. The average credit card balance among consumers was $5,221 as of Q3 2021. That’s 2.1% lower than the 2020 average balance of $5,315.

    Credit card limits fell slightly as well, to an average of $30,233 in 2021. The 1.9% pullback was similar to the decline in balances, so it’s not so surprising that the average the percentage of a credit limit a consumer carries as a balanceremained unchanged, at 25%.

    Consumer Credit Card Snapshot

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    Solution: Raise The Minimum Payment Formula

    To help revolving cardholders pay down their debt more quickly, increase the minimum payment formula. There are a number of approaches issuers could take to implement this. One would be to raise the principal portion in the prevailing formula as a percentage of end-of-statement-period-balances. For example, raising the formula from 1 percent to 2 percent would shorten the time to pay off a $3,000 balance at 18 percent interest from 11.5 years to 7.8 years and save $1,339 in interest for someone making only the minimum payments and no new purchases. The province of Quebec adopted this approach more aggressively when the provincial legislature passed a law to gradually raise its prevailing minimum payment rate from 2 percent to 5 percent of principal by 2025.34

    An approach that would eliminate declining payments would be to set the minimum principal portion of payments 1 percent of the total credit line rather than the month-end balance. This would hold the principal portion of minimum payments constant and at an amount equal to that which was found to be affordable to the borrower at the time of account opening. This approach would affect borrowers that were at or close to full utilization the least. Conversely, it would affect borrowers tapping their credit lines for small amounts the most, encouraging them to pay off their debts quickly rather than allowing them to accumulate.

    Minimum Payment Formula:
  • Ibid.
  • Ibid.
  • Ibid.
  • Adams and Bord, supra.
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