2022 American Household Credit Card Debt Study
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2022 American Household Credit Card Debt Study
NerdWallet’s annual report shows credit card debt surging in tandem with the rising cost of living. Many Americans are concerned about financial issues in the year to come.
By Erin El Issa Senior Writer | Personal finance, analysis of data, credit card Erin El Issa writes data-driven research on personal financial matters, credit cards, investment, travel, banking as well as student loans. She is a fan of numbers and hopes to simplify data sets in order to help people improve their financial lives. Before becoming the Nerd during 2014, she was an accountant for tax and freelance personal financial writer. Erin’s work has been cited by The New York Times, CNBC and on the “Today” programme, Forbes and elsewhere. In her free moment, Erin reads voraciously and is unable to keep up with her two children. She is based in Ypsilanti, Michigan.
Jan 10 Jan 10, 2023
Editor: Paul Soucy Lead Assigning Editor Credit scoring, credit cards personal financial planning Paul Soucy leads the credit cards content team at NerdWallet. He was editor at The Des Moines Register, USA Today and Meredith/Better Homes and Gardens for more than 20 years. He after which he established a successful freelance writing and editing business. He edited his work for the USA Today Weekly International Edition and was awarded the top distinction of the year from ACES: The Society for Editing. He holds a bachelor’s degree in journalism as well as a Master of Business Administration.
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The past year has been a very expensive one. The cost of living is increasing faster than incomes, causing many Americans to take on more debt to make ends meet. In addition, interest rates that have risen in response to inflation are making borrowing more expensive.
NerdWallet’s annual review of household debt finds that the balances on credit cards carried from month to month been increasing over the last 12 months, totaling around $460 billion by September 2022 . Auto loans and overall debt loads have also increased in the last year, while student loan debt dropped somewhat.
Here’s a breakdown of what U.S. households owed in total and the average amount per household for all types of debt in September 2022 .
Type of debt
The amount of debt owed by the ordinary U.S. household with this amount of debt
Total owed in the U.S.
Change in percentage for total debt between 2021 to 2022
Any kind of debt*
$165,388
$16.51 trillion
+7.65%
Kreditkartes (total)**
$17,066
$1.05 trillion
+15.17%
Credit cards (revolving)
$7,486
$459.6 billion
+28.73%***
Mortgages
$222,592
$11.67 trillion
+8.54%
Auto loans
$28,975
$1.52 trillion
+5.31%
Student loans
$58,238
$1.57 trillion
-0.64%
* This debt could include mortgages, lines of credit for home equity as well as auto loans, credit cards, loans for students, loans and other debts of the household, according to the Federal Reserve Bank of New York. Total U.S. credit card outstanding debt is comprised of transacting and revolving balances. ***Revolving debt was calculated with the average of the last five years of percentages of credit card debt deemed revolving (carried monthly) instead of transacting (paid in full every month). The past few years, we’ve had these numbers from Experian. The credit bureau has declined to release the revolving vs. transaction data for 2022.
A note about this year’s data
The increase of nearly 30% in revolving credit card debt (that is, balances of credit cards that are carry from month-to-month — can be attributed to two reasons: a significant increase in the total amount of credit card debt (revolving or nonrevolving) and a greater amount of credit card debt that is revolving. Credit card debt total rose by 15 percent. Since the price of living is exceeding income growth so it is only natural that the majority of the increase was in as a result of the revolving debt. This is merely an estimate; we calculated it by using the average percent of revolving debt over the last five years. This percentage is higher that the previously low revolving credit percentage of 2021 however it is comparable to the percentages from prior years before the COVID-19 epidemic.
Our annual study analyzes government data — from such sources like The U.S. Bureau of Labor Statistics and the Federal Reserve Bank of New York — to examine how household debt changes over the last year. NerdWallet also recently commissioned an online survey of more than 2000 U.S. adults, conducted by The Harris Poll, to learn more about the way Americans are feeling about their debt, and what they believe future rate hikes will impact their financial position. We also asked about Americans who use “buy now, pay later” services, and how their income has (or not) kept pace with inflation, and their financial worries for the year to come.
The key results
The cost of living is rising more quickly than incomes. Over the last year, median household income has grown just 4 percent, while the overall cost of living has increased by 8 . The survey found that nearly 50% of working Americans (45%) believe that their salaries haven’t been growing enough in the last 12 months to keep up with inflation.
Buy now, pay later services may mean deeper debt for millions. Close to 1 in 5 Americans (18 percent) say they have employed a BNPL service in the past 12 months.
Consumers are worried about financial stability over the coming year. Seven out of 10 Americans (69 percent) are worried about their finances over the coming year. The number. top concern is the need to go into debt/more debt to cover necessities (31 percent) The next concern is paying higher interest on their debt (27 percent).
The average amount of interest on credit cards paid by households is rising because of recently announced Federal Reserve rate hikes and rising amounts of credit card debt that is revolving. U.S. households that carry credit card debt are expected to pay an average of $1380 in the interest rate this year . And that’s assuming interest rates don’t rise.
“Credit credit card debt is typically thought to be the result of frivolous expenditure, however for the majority of Americans, that’s just not the case,” says Sara Rathner, a NerdWallet credit cards expert. “Consumers are feeling the pinch of higher prices and interest rates, and paychecks just aren’t keeping up. This is forcing many to take difficult choices, such as going into debt to cover the costs of living.”
Cost of living outpaces income growth significantly over past year
Every year, we analyze growth in the cost of living as compared to the household income in the prior decade to determine whether income is keeping up with expenses. When using that 10-year time period, we discovered that income is keeping up the pace: Median household income is up by 44% from 2012 and the overall cost of living has been up by 28% in the same time frame . But the story changes radically when you consider quick-term growth because of the COVID-19 epidemic and the extraordinary high rate of inflation.
The growth rate over the last three years -from pre-pandemic until nowthe median income has increased by 7%, however overall expenses have increased by nearly 16percent . This includes a 27% rise in transportation expenses and a 20 percent increase for food and beverage costs and a 14% rise in the cost of housing. And that may partly explain the reason, according to our study, 45% of Americans believe their financial health is less good as compared to before that COVID-19 epidemic.
In the survey, nearly fifty percent of all employed Americans (45 percent) claim that their salaries haven’t increased enough over the past 12 months to keep pace with the rate of inflation. In the consumer price index and income growth data backs this assertion. Over the past year the prices have risen up to 8.2 percent annual inflation as of September 2022. It includes an increase of 13% increase in transportation costs and drinks and food costs, and 8% increase in housing costs. In contrast, the the median household income has increased only 4% during this time .
Consumers are doing all they can to combat higher prices. According to the survey almost 4 out of 5 Americans (79 percent) say they have made changes in response to rising prices over the last six months: 42 percent of Americans say they’ve driven less, and 39% say they’ve bought more brand-name store brands as well as unprocessed essentials. Nearly one in five Americans (19%) claim they’ve borrowed more money due to the rise in inflation over the last six months.
” Reviewing your spending habits to see where you can cut down and then putting the extra funds to debt repayment or savings could be extremely beneficial. ” Sara Rathner , NerdWallet credit card expert
Debt is making Americans feel overwhelmed, anxious and stressed
In the last year, almost 3 in 10 Americans (28 percent) say their overall debt has increased, with 14% of Americans have taken on medical debt during this period. This debt is taking a toll.
According to the study, 41% of Americans who currently have debt are anxious about it, while 35% are overwhelmed. The feeling of being overwhelmed is more prevalent for Americans with annual household incomes less than $75,000 and who have debt: 44% of the population is feeling this way, as against 27% of debt-laden Americans with households earning $75,000 per year or more.
BNPL may be hiding additional debt
Our annual analysis of household debt analyzes traditional types of debt including mortgages, credit cards, or student loans. The data on these debts is collected and reported by government entities like that of the Federal Reserve Bank of New York. But the debt problem may get worse due to the emergence of short-term loans offered by companies such as Affirm and Klarna. BNPL services allow you to purchase something today and make installment payments — often 25 percent at the time of purchase and 25% each two weeks until paid off. The longer-term BNPL options typically have a fee for interest, similar to an installment loan.
Based on our research roughly one-in-five Americans (18%) have used a BNPL service within the last 12 months. The situation is even more common among younger Americans: 25% of Generation Zers (ages 18-25) and 30% of young adults (ages between 26 and 41) have used these services within the last year, while 16% among Gen Xers (ages 42-57) and 7% among baby boomers (ages between 58-76).
Some Americans rely on BNPL service to purchase daily necessities such as things that get consumed before they’re paid for. According to a September 2022 report from the CFPB or CFPB usage of the CFPB for everyday or necessary purchases like gas, groceries and utilities — increased by 434 percent in the period between 2021 and 2020 and increased by 1,207% between 2019 and 2020.
BNPL services typically come with no interest, but they may charge late fees for those who miss payments. The CFPB report found that 10.5% of BNPL borrowers were assessed at the very least one late fee by 2021. And while late fees tend to be small at around $7 for the annual average loan total of $135 -The report outlines the potential negatives of these types of services that could turn financially unsound, such as overextending or accepting more loans than you can reasonably manage.
For consumers who use the BNPL every now and then, overextension probably won’t be an issue. For those who pile loans by taking multiple loans in a short amount of time and are frequent BNPL users the obligations to pay for these loans may hinder their ability to pay other bills promptly due to the quantity of BNPL payments they have to make. This can lead to penalties for late payments, interest charges and even harm to credit scores.
Many Americans are bringing financial stress to the beginning of the year
The last year has been expensiveand many don’t believe things will get better in the coming year. A majority of Americans (69 percent) are concerned about financial issues in the coming year, with a top concern being having to go into more debt to pay for necessities (31%).
Over one quarter of Americans (27 27.7%) are concerned about the prospect of paying more interest on their debt over the coming 12 months; this is following a series of rate hikes from the Federal Reserve and the possibility of additional rate increases in 2023.
The interest rates on credit cards are rising and could go higher.
This action by the Federal Reserve has increased the average credit card interest rate on accounts incurring interest to 18.43 percent as of August 2022, according to the Federal Reserve Bank of St. Louis. This is the highest average rate since the St. Louis Fed began monitoring this data in 1994. For American households carrying an average of revolving credit card debt this would result in $1,380 in annual interest charges. The year before, average annual interest charges of $1,029 due to lower revolving credit card debt and lower interest rates.
During 2022, Americans saw seven rate increases from the Fed and more may be coming in 2023. According to the survey that more than 3 out of five Americans (61 percent) believe that future interest rate increases will affect their financial position, in good or bad ways. However, while 33 percent of Americans believe that they’ll make their current credit more expensive, and 28% think it will make the new borrowing more expensive, 1 out of five Americans (20%) believe they’ll earn more interest on their savings.
What do Americans can do?
Make preparations for a potential recession. As of now there is no recession officially declared, but some experts suggest that we’re currently in one or is coming soon. Even if you are aware that there’s a chance, however, it can be impossible to predict what’s to come because the effects of a recession are neither common nor universal. Moreover, it is possible for uncertainty to quickly become disaster. The last few years have provided plenty of evidence about the importance of preparing for unexpected events and there are strategies to to limit the impact on your financial health.
If you’re in a position to do so, you should add funds to your savings routinely. This could mean continuing to build an emergency fund that covers 3 to 6 months of expenses, or perhaps investing more for the eventuality of longer-term income loss. To have more funds to put toward savings take a look at your budget and determine the areas you can reduce. It’s not necessary to cut down on your expenses forever In the short-term it will help you increase your savings more quickly.
“If you think that a few months’ worth of expenses is too much to put aside now, shoot to put a few hundred bucks in an emergency savings account” NerdWallet’s Rathner suggests. “It can be enormously helpful when you’re faced with an unexpected cost.”
” You can’t control the economy at large however, you can take even small steps to feel more financially secure right now. ” Sara Rathner , NerdWallet credit card expert
It is better to pay now than later, if it is possible to. Utilizing a buy now pay later option might be the best option for you however, before you decide to use one, look at other options. If you have enough funds for the payment of your balance placing the charge to a credit card could earn rewards and also protect your purchase in case of a defective or return product. It is also an excellent idea to save for non-essential items for the duration of six weeks — which is the standard BNPL period — and then make the purchase. It is possible that you will no need to buy the item after a certain amount of time has expired.
If you choose to use BNPL services, you can set automated payments to avoid late charges and limit the number of purchases you make in an unspecified time to avoid getting overwhelmed.
Avoid big financial moves If you can, avoid major financial moves. In light of consumer concerns over rising interest rates and credit becoming more difficult to access, and decreased credit limits, you may want to hold off on accepting new credit obligations as long as you are able to. This may not be feasible for you, and that’s OK; sometimes we just can’t wait for the right moment, particularly when experiencing financial distress. However, if you are able to put off making big financial changes then it’s probably a good option to wait.
“This is a good time to focus on financial basics,” Rathner says. “Checking your expenditure for areas to cut costs and then putting the additional funds for savings or debt repayment could be extremely beneficial.”
Learn how rising interest rates impact you. A majority of Americans (21%) aren’t sure whether future rates could affect their financial situation, as per the poll. However, if you’re a homeowner with high-interest loans that are variable, such as credit cards or a home equity credit line -or are in savings accounts, increasing rates will probably affect you. The same goes for new loans with fixed rates like the mortgage or auto loan.
Interest rate increases can make your debt more expensive however they can increase your savings more quickly. If you are in debt with a variable rate try to make more frequent or higher-quality payments to pay it down more quickly. Avoid applying for big loans with fixed rates as well as you canthe higher rates will make major purchases, like a home or car, significantly more costly. If you have savings accounts, you should check the interest rate. Rates have been incredibly low until recently, but today, you can get annual percentage rates, also known as APRs, of at least 3.
“The potential for economic uncertainty is always frightening,” Rathner says. “You can’t control the global economy, but you can take the smallest steps to feel financially secure right now.”
Methodology
The survey was conducted online in the United States by The Harris Poll on behalf of NerdWallet from October. 25-27, 2022, with 2,041 U.S. adults 18 and older. The precision of sampling of Harris online polls is assessed by using a Bayesian credible interval. In this study, the sample data is accurate to within +/- 2.8 percentage points, using the 95% confidence level. For complete survey methodology that includes weighting variables and size of the subgroups, please get in touch with Lauren Nash at .
NerdWallet’s analysis includes data from the following sources:
September 2022, by the Federal Reserve Bank of NY’s Center for Microeconomic Data.
December 2021, as reported by December 2021, from the U.S. Census Bureau.
from the Board of Governors of the Federal Reserve System.
September 2022, as reported by The U.S. Bureau of Labor Statistics.
December 2021, taken from December 2021, from the U.S. Census Bureau.
September 2022, in the U.S. Bureau of Labor Statistics’ National Compensation Survey.
August 2022. From the Federal Reserve Bank of St. Louis.
Expand for footnotes
[1] Credit card balances that are revolving analyzed differently from other types of household debt. It is the Federal Reserve Bank of New York utilizes data from Equifax, one of the three largest credit reporting bureaus in the U.S., as the source of its data on credit card debt and also includes the balances that are revolving (debt carried from month to month) and balances that are transacted (debt that will be paid off in the time of the next statement). The past few years, we’ve relied on information of the credit bureau Experian to determine the proportion of balances that were revolved and transacted through bank credit cards. Experian declined to provide information for 2022, so we used the average of percentages from 2017 through 2021. Information on revolving balances on retail credit cards wasn’t available therefore we assumed that cardholders revolved their debt on both retail credit cards and bank credit cards in the same way. Then, we multiplied the total outstanding credit card balances within the U.S. — $1.05 trillion at the time of September 2022 — by the proportion of debt that was revolving. (According according to New York Fed, the majority of households in the country had outstanding credit card balances of $925 billion by September 2022. This includes bank credit cards , but no retail credit cards. To make this number more representative of all credit card debt, we rounded up the $925 billion and compared the 25% the reported “other” debt; the New York Fed says about one quarter of the so-called other debt is outstanding credit card debt.) Then, we divided the sum by the number of households carrying credit card debt that is revolving. We estimated the number of households by multiplying the total number of U.S. households, projected using data published at the close of 2021, and then dividing it by the proportion of households that have that debt (using 2022 estimates based on 2019 data taken from the Fed’s Survey of Consumer Finances).
2] To estimate household debt for each category — with the exception of revolving credit card debt — we took the average of the various types of debt that are which was provided by the Federal Reserve Bank of New York and then divided in the amount of homes that have this kind of debt. We calculated the number of houses by multiplying the number of U.S. households, projected based on data that were released at the end of 2021, by the percentage of households holding the debt, based on information taken from the 2018 Survey of Consumer Finances.
[3] Consumer price indexes or CPIs track changes in the price of the consumer products and services. The price indexes we studied include prices for apparel education and communication food and beverages and food in the home environment, meals away from home, housing, medical, other products as well as services, recreational activities and transportation. As per the U.S. Bureau of Labor Statistics, the price index of all goods and services increased by 274.214 up to 296.761 between September 2021 between September 2021 and September 2022. Transportation CPI was up from 237.107 to 267.043, food and beverage CPI increased from 280.413 and reached 310.635 while housing CPI rose from 283.532 up to 306.323 between September 2021 and September 2022. To measure the change in the price index categories and the growth in income from 2012, we forecast the 2022 median household income by using the 2021 median reported income of $70,784 and increasing or decreasing it according to the quarterly percent changes reported within the Bureau of Labor Statistics’ Employment Cost Index data for civilian workers. Based on Census data the median household income was $70,784 in 2021, and our projections show an average household income of $73,653 by 2022.
[4] To determine interest on credit cards over the course of a year, we utilized our estimate of revolving credit card debt and information on the average rate of interest on credit card accounts assessed interest by the Federal Reserve Bank of St. Louis beginning in August 2022. Assuming a constant balance, we multiplied the average of revolving credit card debt of households with high credit card balances by their average annual percentage rate. This is just an estimate; for simplicity our calculations do not account for daily compounding or fluctuating balances.
5. As per the U.S. Bureau of Labor Statistics, the price index of all items increased by 231.015 up to 296.761 in the period between September 2012 and September 2022. Based on Census information the median household income was $51,017 in 2012; our projections suggest the median household income to be $73,653 by 2022.
[6] According to the U.S. Bureau of Labor Statistics, the price index for all items increased by 256.596 up to 296.761 between September 2019 until September 2022. Transportation CPI was up to 209.896 to 267.043 Food and drink CPI was up from 258.59 and reached 310.635 and housing CPI rose from 267.555 and reached 306.323 between September 2019 and September 2022. Based on Census data the median household’s income was $68,703 in the year 2019 and our projections project an average household income of $73,653 for 2022.
The author’s bio: Erin El Issa is a credit card expert and a writer for studies at NerdWallet. Her work has been highlighted on USA Today, U.S. News and MarketWatch.
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