Amer­i­cans’ credit card debt hits record-high $1.1 tril­lion

And the No. 1 rea­son peo­ple carry a bal­ance? Gro­ceries, new sur­vey shows.


Amer­i­cans may have a love-hate re­la­tion­ship with their credit cards, but that’s not pre­vent­ing them from pil­ing on debt.

The coun­try’s out­stand­ing credit card and other types of re­volv­ing debt have jumped al­most 20% from a decade ago, reach­ing an all­time high of about $1.1 tril­lion, ac­cord­ing to a re­cent study from Com­pare­Cards.

The av­er­age bal­ance on a credit card is now al­most $6,200, and the typ­i­cal Amer­i­can holds four credit cards, ac­cord­ing to the credit bureau Ex­pe­rian. Credit card is­suers are also giv­ing Amer­i­cans more room to run up debt, boost­ing the typ­i­cal credit limit by 20% over the last decade to $31,000.

The rea­sons for the spike in credit card debt are com­pli­cated and po­ten­tially wor­ri­some, fi­nan­cial ex­perts say. A mid­dle-class life­style has be­come more ex­pen­sive with the cost of health care and ed­u­ca­tion out­pac­ing wage growth, prompt­ing more house­holds to rely on their cards to cover emer­gency ex­penses and daily spend­ing, ex­perts say.

“If you have credit card debt when times are good, it means you prob­a­bly aren’t putting away as much money as you should for when things even­tu­ally go south – and things al­ways even­tu­ally go south,” says Matt Schulz, chief in­dus­try an­a­lyst at Com­pare­Cards.

What’s eye-open­ing are the types of ex

“Gro­ceries are the num­ber one rea­son why peo­ple carry a bal­ance. I was shocked, and I typ­i­cally don’t get too shocked with these things.”

Michael Micheletti Free­dom Debt Re­lief

By Aimee Pic­chi

penses con­sumers blame on their credit card debt, says Michael Micheletti, di­rec­tor of cor­po­rate com­mu­ni­ca­tions for Free­dom Debt Re­lief. The debt-re­duc­tion com­pany in Jan­uary sur­veyed more than 2,000 U.S. con­sumers about their debt, sav­ings and out­look to get a snap­shot of their fi­nan­cial health.

“Gro­ceries are the num­ber one rea­son why peo­ple carry a bal­ance,” Micheletti says. “I was shocked, and I typ­i­cally don’t get too shocked with these things.”

More con­sumers may be charg­ing gro­ceries be­cause they’re strapped with other types of debt, such as stu­dent loans, which have dou­bled to about $1.6 tril­lion in out­stand­ing debt since 2010, he notes. Auto loans and mort­gages are also at all-time highs. Af­ter re­pay­ing monthly home, auto and stu­dent loans, some con­sumers don’t have much wig­gle room, Micheletti adds.

“Ev­ery­day ex­penses you used to pay cash for, you are now putting on your credit card,” he notes.

Some house­holds are also re­ly­ing on credit cards when they’re in a pinch. Seven in 10 con­sumers would have trou­ble com­ing up with $500 for an un­ex­pected ex­pense, the sur­vey found.

A decade of ex­pan­sion

Ris­ing credit card debt isn’t nec­es­sar­ily neg­a­tive in it­self. A strong job mar­ket and grow­ing econ­omy mean con­sumers are more op­ti­mistic about job se­cu­rity and their fi­nan­cial out­look, says Gan­nesh Bharad­hwaj, gen­eral man­ager of credit cards at Credit Karma.

“A decade ago, we were just start­ing to come out of the re­ces­sion caused by the fi­nan­cial cri­sis,” he notes. “Since then as the econ­omy has re­cov­ered and strength­ened, con­sumers have in­creased their bor­row­ing as they tend to do dur­ing good times.”

And by some mea­sures, con­sumers are fi­nan­cially health­ier. Credit scores reached an all-time high of 703 last year, out of a pos­si­ble 850 points. Credit-card delin­quen­cies have dropped by half from a decade ago, Com­pare­Cards notes.

Even so, about 3 in 10 con­sumers be­lieve their credit scores are too low – and high bal­ances could be keep­ing them from boost­ing their scores. The uti­liza­tion rate, or the per­cent­age of your card’s avail­able bal­ance that you tap, is the sec­ond-big­gest fac­tor in your credit score be­hind your pay­ment his­tory, Schulz says.

“If you are some­body whose bal­ance takes up most of your avail­able credit, it will do some dam­age to your credit score,” Schulz notes.

Pay­ing down debt

Con­sumers who carry credit-card bal­ances should fo­cus on pay­ing down their debt in 2020, not only to strengthen their credit scores, but to en­sure they’re in bet­ter fi­nan­cial shape when the next re­ces­sion oc­curs, Schulz says. The risk of a re­ces­sion within the next year is con­sid­ered low by many econ­o­mists, but eco­nomic down­turns are in­evitable.

Here are steps to take:

Make a bud­get. First, get a han­dle on your house­hold spend­ing, rec­om­mends Com­pare­Cards’ Schulz. Then as­sess whether you’ll need to pare spend­ing in some ar­eas or earn more in­come.

Ask for a lower credit card in­ter­est rate. Call­ing your credit card com­pany to ask for a lower rate can pay off: About 7 of 10 con­sumers who re­quested a rate re­duc­tion were suc­cess­ful, ac­cord­ing to “We of­ten see those in­ter­est rates re­duced by up to five to six per­cent­age points,” Schulz says. “That can be a sig­nif­i­cant sav­ings.”

Open a bal­ance trans­fer card with 0% in­ter­est or a per­sonal loan. It may seem counter-in­tu­itive to take out an­other credit card, but bal­ance trans­fer cards – which offer 0% in­ter­est for an ini­tial pe­riod – can help you save money on in­ter­est, pro­vid­ing flex­i­bil­ity to pay down debt, Schulz notes. Per­sonal loans, which offer a struc­tured re­pay­ment plan, can also be help­ful.

The snow­ball ver­sus avalanche ap­proach. If you’re mo­ti­vated by a quick win, the snow­ball method might be your go-to strat­egy. This pri­or­i­tizes pay­ing down cards with the small­est bal­ances. The avalanche ap­proach, though, could save more money in the long run, as this fo­cuses on re­pay­ing cards with the high­est in­ter­est rates.


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