According to a recent Bankrate credit card debt survey, more credit cardholders are carrying card balances from month to month. In November 2023, 49 percent of cardholders fell into this credit card “debt revolver” category — up from 39 percent in 2023 and 47 percent in July 2023.
This trend is occurring against the backdrop of high inflation, which has led consumers to rely on their credit cards to cover expenses. Total credit card balances reached $1.08 trillion in the third quarter of 2023, as reported by the Federal Reserve Bank of New York. Interest rates on this debt have also risen, with the average APR for revolving credit standing at 22.77 percent in the third quarter.
Bankrate senior industry analyst Ted Rossman notes, “Americans’ credit card balances have surged by 40 percent in the past two years, with most cardholders experiencing a 5.25 percentage point increase in rates due to the Fed’s efforts to combat inflation. It’s not surprising, then, that more individuals are carrying more debt for longer periods.”
Despite these challenges, credit card delinquencies remain relatively low at 2.98 percent. The Fed also reports that Americans’ debt-to-income ratios are low, despite the financial strain caused by inflation.
Key insights
- 49 percent of credit card holders are carrying a credit card balance from month to month — an increase from 39 percent in 2023.
- Generation X leads the pack, with 55 percent saying they carry a credit card balance, followed by millennials at 51 percent, Gen Zers at 48 percent and baby boomers at 44 percent.
- Emergency or unexpected expenses are the leading cause of credit card debt, with 43 percent of cardholders saying they’re carrying a balance due to an unexpected or emergency expense.
Who is most likely to carry credit card debt?
Generation X (ages 44 to 59) is most likely to carry credit card debt, with 55 percent saying they carry a balance from month to month, followed by millennials (ages 28 to 43) at 51 percent. Behind millennials are Gen Zers (ages 18-27) at 48 percent and baby boomers (ages 60-78) at 44 percent.
Bankrate’s survey also reveals that credit card usage increases with age, with 83 percent of baby boomers, 76 percent of Gen Xers, 73 percent of millennials, and 69 percent of Gen Zers using credit cards.
Females are more likely to carry credit card debt, with 52 percent of female cardholders carrying debt compared to 45 percent of male cardholders.
Other key findings include:
- Cardholders in the South (52 percent) and Midwest (50 percent) are more likely to carry credit card balances than those in the Northeast (47 percent) and West (43 percent).
- Urban cardholders (52 percent) are more likely to carry credit card debt compared to those in rural areas and towns (51 percent each) and suburbs (44 percent).
- Individuals with annual household incomes below $50,000 (56 percent) are more likely to carry credit card debt than those with incomes of $100,000 or higher (38 percent).
Credit card debt helps tackle emergency expenses
Although 58 percent of those with credit card debt have been in debt for a year or more, this percentage has decreased from 60 percent in July 2023. However, it is still higher than the 50 percent reported in 2023 when interest rates were lower due to the near-zero Fed’s target interest rate.
The primary reason for carrying credit card debt, cited by 43 percent of adults, is unexpected or emergency expenses.
Some of the common expenses that lead people to carry credit card debt include:
- Unexpected medical bills (11 percent)
- Necessary car repairs (10 percent)
- Home repairs (9 percent)
- Other unexpected or emergency repairs (14 percent)
Additionally, day-to-day expenses such as groceries, child care, and utilities are cited by 26 percent of balance-carrying consumers as reasons for carrying credit card debt.
Card balances will linger for a while
While it’s convenient to use credit cards for purchases, paying off accumulated debt can be challenging for many individuals.
According to a survey, 22 percent of U.S. adults carrying a balance feel overwhelmed by their card debt, while 10 percent are unsure how to make significant progress in paying it off. Sixteen percent are worried about meeting their minimum payments in the next six months.
Furthermore, a tenth of those with credit card debt do not see a way out and believe they will never be debt-free, while 26 percent anticipate it will take five years or more to clear their debt. On the positive side, 47 percent of balance-carrying consumers have a plan in place to reduce their debt.
How to tackle your credit card debt
Paying off credit card debt sooner can save you money on interest payments. For instance, paying off a $5,000 balance at an average interest rate of 22.7 percent with monthly payments can significantly impact the total interest paid.
Here are four effective strategies to help you pay off your credit card debt efficiently:
- Utilize a balance transfer card with a low-interest promotional rate and clear your debt before the promotional period ends to minimize interest charges.
- Consider using a personal loan with lower interest rates to pay off your credit card debt and reduce overall interest costs.
- Implement budgeting techniques like the debt avalanche method or debt snowball method to organize and pay down your debts systematically.
- Consult with a reputable financial counselor to create a customized plan for paying down your credit card and other debts.
“While Americans are managing their credit card debt pretty well, all things considered, we are seeing pockets of trouble at the household level,” says Rossman. “If you have credit card debt, this is probably your highest-cost debt by a wide margin. My top tip is to sign up for a 0% balance transfer card. These allow you to move your existing debt to a new card which won’t charge interest for up to 21 months.”
FAQs
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Generation X is more likely to carry a card balance than members of other generations. It could be due to this “sandwich generation” caring for elderly parents as well as their own children. While baby boomers are more likely than other generations to use credit cards, they are less likely to carry a balance.
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Emergency expenses are the top reason consumers say they’ve ended up carrying credit card debt. Unanticipated medical bills, car repairs, and home repairs are among the reasons balance-carrying cardholders turn to their credit cards as a financial lifeline.
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More than a third (36 percent) of those with credit card debt expect that it will linger for at least five years, including 10 percent not seeing any light at the end of the tunnel at all.
Methodology
Bankrate commissioned YouGov Plc to conduct the survey. The study involved 2,350 U.S. adults, including 1,796 cardholders and 873 individuals carrying a credit card balance. The fieldwork was conducted between November 28–30, 2023. The survey was done online and met strict quality standards, utilizing a non-probability-based sample with quotas and a weighting scheme to ensure nationally representative results.
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