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2023 was a rough year financially for many. Although the U. S. inflation rate is moving back toward historical norms, we’re still feeling the effects of price hikes from 2022. It’s hardly surprising that debt balances are higher overall when you consider the combination of rising interest rates, the reinstatement of federal student loan payments, and incomes that aren’t keeping up with rising living expenses.
According to NerdWallet%E2%80%99’s annual look at household debt, credit card debt is up nearly 2014% when compared to the previous year, for a total of more than $1. 2 trillion, as of December 2023. [1] Mortgages, auto loans, student loans and overall debt loads also increased over the past year.
Here’s a breakdown of what U. S. as of December 2023 [2] the total amount owed by households as well as the average amount owed by each type of household:
Previously, the total amount of credit card debt and an estimate of revolving credit card debt—balances that are carried over from month to month—were determined by NerdWallet’s annual household debt study. However, due to the lack of a consistent, reliable data source, we’ve discontinued the revolving estimate this year. That said, a NerdWallet survey (see below) finds that 38% of Americans say they currently have revolving balances.
Our annual report analyzes government data from sources such as the U. S. the Federal Reserve Bank of New York and the Bureau of Labor Statistics to determine changes in household debt during the previous year
NerdWallet also commissioned an online survey in November 2023 of more than 2,000 U. S. adults, among whom 796 currently have revolving credit card debt, or balances carried from month to month. Americans with revolving credit card debt were asked in a Harris Poll survey what feelings their debt evokes in them and what obstacles stand in their way of paying off their debt in the upcoming year.
Looking to ace your quiz on credit card debt? Look no further! This comprehensive guide will equip you with all the knowledge you need to understand the average amount of credit card debt held in households, its implications, and strategies for managing it effectively
Let’s dive in!
Understanding Credit Card Debt
Credit card debt refers to the outstanding balance on credit cards that individuals or households carry over time. It arises when cardholders spend more than they can afford to repay within the billing cycle, incurring interest charges and potentially late fees.
Factors Influencing Credit Card Debt
Several factors contribute to the accumulation of credit card debt, including:
- High Interest Rates: Credit cards typically carry high interest rates, making it challenging to pay off balances quickly.
- Overspending: Spending beyond one’s means is a primary driver of credit card debt.
- Financial Emergencies: Unexpected expenses, such as medical bills or car repairs, can lead to increased credit card usage.
- Lack of Budgeting: Without a proper budget, it’s easy to lose track of spending and accumulate debt.
- Easy Access to Credit: The widespread availability of credit cards makes it tempting to use them for everyday purchases.
Average Credit Card Debt in Households
According to the Federal Reserve Bank of New York, the average credit card debt per household in the United States as of the second quarter of 2023 stands at $8,956. This figure represents a slight increase from the previous quarter and reflects the ongoing challenges many Americans face in managing credit card debt.
Implications of Credit Card Debt
High levels of credit card debt can have significant negative consequences, including:
- Damaged Credit Score: Credit card debt can negatively impact your credit score, making it difficult to obtain loans or secure favorable interest rates in the future.
- Increased Financial Stress: The burden of debt can lead to anxiety, stress, and even depression.
- Limited Financial Flexibility: High debt payments can constrain your ability to save for important goals or handle unexpected expenses.
- Potential for Debt Collection: Failure to repay credit card debt can result in collection actions, which can further damage your credit score and lead to legal consequences.
Strategies for Managing Credit Card Debt
If you’re struggling with credit card debt, there are steps you can take to regain control of your finances:
- Create a Budget: Track your income and expenses to identify areas where you can cut back on spending.
- Prioritize Debt Repayment: Focus on paying down high-interest credit card balances first.
- Explore Debt Consolidation: Consider consolidating multiple credit card debts into a single loan with a lower interest rate.
- Seek Professional Help: If you’re overwhelmed by debt, consider consulting a credit counselor or financial advisor for guidance.
Additional Resources
- Quizlet Flashcards:
- Sociology True/False Flashcards: https://quizlet.com/49479424/sociology-truefalse-flash-cards/
- Unit 3 Lesson 2 Flashcards: https://quizlet.com/112889451/unit-3-lesson-2-flash-cards/
- Federal Reserve Bank of New York: Household Debt and Credit Report: https://www.newyorkfed.org/microeconomics/hhdc
- Consumer Financial Protection Bureau: Managing Credit Card Debt: https://www.consumerfinance.gov/topics/credit-cards/managing-credit-card-debt/
Remember, managing credit card debt effectively requires discipline, planning, and a commitment to responsible financial habits. By understanding the factors contributing to debt, its implications, and strategies for managing it, you can take control of your finances and achieve your financial goals.
Cost of living has grown faster than income in the past four years
Every year, we examine whether the growth in median income has kept up with or fallen short of the cost of living during the previous ten years. Since 2013, the median income has increased by %2044%, while the overall cost of living has increased by approximately %2032%. [5] However, if you limit that period of time to the last four years, from right before the pandemic to the present, it is evident how tight money is for many Americans.
Costs have increased since 2019 and are expected to reach 2020, while median income has increased by 12% over the same period, according to data from the Bureau of Labor Statistics and the U.S. S. Census Bureau. In particular, during the last four years, food, housing, and transportation costs have all increased significantly more than the median income%20%E2%80%94%2025%,%2021%%20, and%2030%, respectively. [6].
This is mirrored in our survey’s results, which state that 48% of Americans with credit card debt claim that their balances are a result of their spending on necessities. In close proximity to a third of those with revolving credit card debt (31%), 31% say they need to use a credit card to make ends meet, and 33% say they think credit cards are essential to success in America if you’re not wealthy.
Rising costs thwart debt payoff plans
Not only has the cost of living increased for many Americans, but it has also made it more difficult for them to pay off their debt. As per our poll, the overwhelming majority of Americans who presently owe money on their credit cards (89%) say they are attempting to pay it off over the course of the upcoming 2012 months. But most (87%) see roadblocks that could affect their ability to do so. The majority of people with credit card debt (50%) attribute their rising costs of goods to the biggest obstacle.
Most Americans (14%) who have a credit card debt that revolves around 1% of their income claim that having to make federal student loan payments is a barrier to paying off their card balances over the course of the upcoming year. Federal student loan bills resumed in October after a three-year hiatus. For some, this entails paying hundreds of dollars or more in monthly loan payments in addition to attempting to pay off credit card debt and keep up with growing expenses. It’s no wonder indebted Americans are stressed out.
Credit card and household debt hit record high
FAQ
What is the average household credit card debt?
What is the average number of credit cards held by card holders?
What is the average amount of credit card debt American households have accumulated?
|
Debt type
|
Average balance (2023, Q3)
|
Total Balance (2023, Q4)
|
|
Auto loan
|
$23,792
|
$1.61 trillion
|
|
Credit card debt
|
$6,501
|
$1.13 trillion
|
|
Student loan debt
|
$38,787
|
$1.6 trillion
|
|
Total debt
|
$104,215
|
$17.50 trillion
|
What is the average amount of debt a household carries in consumer debt?
How much credit card debt do Americans owe?
Average household debt: The average American household owes $10,848 in credit card debt. Average debt over time: The average American household’s credit card balance has increased by more than 78% since 1990, after adjusting for inflation.
What does credit card debt mean?
Note, when we refer to credit card debt across this page, it means outstanding credit card balances and does not include all the credit card debt that consumers defaulted on and are still liable for. Average household debt: The average American household owes $10,848 in credit card debt.
Which states have the most credit card debt?
People living in Alaska had the most credit card debt in 2019, with an average of $8,026 per person. Residents of New Jersey had the second-highest amount of average credit card debt, at $7,084, followed by Connecticut at $7,082. The state with the least amount of average credit card debt per person in 2019 was Iowa, at $4,744.
What is the average credit card balance?
The average credit card balance is $10,848 per household, as of Q4 2023. Adjusted for inflation, the average household’s balance is actually well below the record high of more than $12,000 at the end of 2008. Below, you can find additional data on average credit card debt levels over time.