Credit card debt in America continues to rise; the Federal Reserve released numbers for August 2017 showing over $13 billion in outstanding credit card debt.
Why has credit card debt become such a problem?
According to a 2017 study from creditcards.com, which surveyed credit card holders in the United States, “many carry debt for years; those with more income [are] likelier to hold debt.” From problems controlling spending to spiraling interest costs, US consumers of all backgrounds can fall into trouble with debt. How can this study help you? By giving you a better understanding of what is contributing to the growing problem of credit card debt, and how you can avoid it.
Lower income earners carry less debt each month
More money, more problems? It may not feel so in 2018, but it does often ring true. In fact, consumers with salaries over $50,000 are more likely to carry a balance on their credit cards each month: 38% of consumers making over $50,000 carry a balance, while only 24% of those who make under $50,000 said the same.
Individuals with debt in higher income categories also report holding their debt longer. Of respondents who made over $75,000, 27% report carrying their balance for at least five years, as compared to only 20% of respondents at lower income levels.
Per the survey, consumers with more education are also more likely to carry debt; 34% of respondents with college degrees reported carrying debt, compared to only 21% of respondents with a high school diploma or less.
Where could higher earnings become a problem when it comes to debt? The temptation of an increased credit limit. The more money you have available, the more opportunities you have to spend beyond your means.
28% of Americans don’t pay their bills in full each month
There may be times when you aren’t able to pay off your full balance, but if this happens every month, then you won’t be able to outpace the amount you’re paying in interest. If your income doesn’t change or you don’t get a big check, you may never be able to catch up. Nearly 1 in 4 survey responders said they’ve been carrying debt for at least five years, which is why it’s essential to stop your cycle of spending until you can get your payments back under control.
Everyday spending is the biggest culprit for credit card debt
Unfortunately, once you already carry credit card debt, you often can’t stop spending on everything you need to survive. However, those small daily amounts will keep your bill and interest rising. The survey reports that 32% of credit card debt comes from everyday spending, with other spending categories including:
• Retail shopping (e.g., clothes): 16%
• Medical bills: 12%
• Home repairs: 10%
• Vacations: 10%
• Car repair and maintenance: 7%
• Other: 7%
However, the survey also found that medical bills are a significant factor in increased debt for individuals who are unemployed; compare 18% of unemployed respondents citing medical bills as a problem to half the amount of full and part-time employed workers mentioning the same.
26% of millennials have problems paying off their balance
With rising housing costs and stagnant wages, it’s no wonder that millennials have trouble paying off their balances. However, an interesting point of comparison is 36% of gen Xers and 33% of baby boomers in the 53 to 62 range also carry a balance. This could be because Gen Xers and baby boomers often have to factor in older children into their expenses, but also because they’ve had cards for longer, making them more prone to interest and debt.
What if you’re in debt right now?
It’s important to remember that you are not alone. No matter whether your credit card debt is minor or massive, take the right steps to change your behavior so you won’t face these problems moving forward.
Paying in cash can be a handy way to ensure you don’t spend more than you have, but if you need to shop online or don’t want to walk around with wads of cash, then it might make sense to consider applying for a secured credit card like the Green Dot Platinum Visa® Secured Credit Card. If you’ve run into problems in the past, secured credit cards are an excellent way to rebuild your credit with responsible use.