One Trillion Dollars Of Credit Card Debt, No Biggie

If you missed the news Americans just passed a milestone.  In the second quarter of 2023 Americans have $1.03 trillion in credit card debt, the first time this number has been passed. 

Credit card debt now joins student loan debt (total $1.77 trillion) and auto loan debt (total $1.56 trillion) as a member of the trillion dollar club.  Woo-hoo!

I wrote about student loan debt in a not-so-serious way, though quite a while ago.  With the current controversial political activities surrounding it, I won’t go there. 

I also wrote about auto loan debt back when it only totaled $1.35 trillion, which just makes me sad. 

But I’ve never really touched on credit card debt. 

 

Credit Card Debt – Just Don’t

To me consumer credit card debt it’s one of those beyond basic things that shouldn’t even have to be covered.  A person who cares at all about their finances and their financial future does not carry consumer credit card debt for more than they can pay off before the monthly due date – period.  That is unless they have a card with a 0% interest rate, which I guess would be ok. 

Or perhaps if they had a huge emergency, exhausted their emergency fund and reserves of cash, and absolutely had no other choice.  And even then it should be treated as if your hair was on fire.  Priority #1 would be to get rid of it, ahead of everything else in life. 

Yet here we are, and as a country we now have over a trillion smackaroos of credit card debt.  You may be thinking – inflation inflation, it’s not our fault!  That argument would make it seem that most folks are barely getting by (with Netflix of course) and times are so hard they have to charge things to stay alive. 

We all know that’s really far from true.

 

The Data

As this Washington Post article (possible paywall) lays out, the more money people make, the more credit card debt they have AND the longer they’ve been carrying a balance. 

From the article:

Bankrate found that 72 percent of cardholders with credit card debt and annual household incomes of $100,000 or more have been in debt for at least a year. The percentage drops to 70 percent for households with credit card debt and incomes between $80,000 and $99,999; 63 percent for people earning between $50,000 and $79,999; and 53 percent for folks making under $50,000.”  So the more you make the longer you’ve been carrying a balance. More money = more stuff.  I suspect it’s not equaling more happiness. 

So, the more money people make the longer they’ve been carrying debt.  Six figure earners are in consumer credit card debt at much higher rates and have been carrying it much longer than those making $60,000, which is about the median household income in America. 

But it’s inflation right?  Times are hard for those 6-figure earners aren’t they?  Must be really tough to get by making over $100,000 a year.  I’m being facetious.

We all know that unless you live in a very few tiny areas such as parts of Manhatten or Silicon Valley, a six figure income makes you upper middle class in a nation with an approximate $70,000 median household income and a median individual income of about $47,000.  Period end of story. 

Yet those six-figure earners are the ones rackin’ up the debt, spending away.  If you can’t get to the Post article here’s the graphics.

 

Percentage Of Earners In Credit Card Debt For 5 Years Or More

 

Use Wisely

I’m not here to bash credit cards. I use credit cards for almost everything.  I love them.  But of course I pay my entire balance every month.  I got my first credit card at the age of nineteen, and I’ve never carried a balance once – ever. 

I get free stuff from using credit cards, lots and lots of free stuff.  Credit cards allow you to not have to carry cash, and offer all kinds of insurance and fraud protection.  They’re mostly great things. 

Unless you don’t pay what you owe every month.  Plain and simple.  And according to the Washington Post article about 47% of all credit cardholders have revolving debt, which means they don’t pay off their balance in full.  I actually thought it’d be higher. 

How about those who not only carry debt but who are past due on paying it?  Bankrate says:

The share of credit-card debt that was at least 30 days past due increased to 7.2%, up from 6.5% in the first quarter. That’s the highest level since the first quarter of 2012, New York Fed data shows. 

This is not a good trend.  In the case of these 7.2% of folks who are delinquent on their debt it is very plausible and likely that many of them are indeed being affected by inflation and are already living life paycheck to paycheck and on the edge financially. 

But no one is going to tell me that the 47% of credit card holders in total who carry debt are struggling the same way.  That would be about a hundred million people. 

 

Conclusion

That’s it, I really have nothing else to say about this situation except to lower my head in sadness.  If you are one of the financially responsible folks out there who doesn’t spend more than they earn and doesn’t carry consumer credit card debt, you can at least see these data and maybe feel good about yourself and the financial habits you’ve cultivated.  Keep it up. 

Don’t fall prey to the the consumer-sucker traps, more stuff won’t make you happy. 

Having money in the bank, a good footing toward financial independence, and the time freedom and security that comes with it will make you happy.