America's Trillion Dollar Credit Card Debt

 How Age Impacts Credit Card Debt: Who Carries the Heaviest Burden?

America'sTrillion Dollar Credit Card Debt

Americans owe nearly a trillion dollars in credit card debt — here's the breakdown by age


Americans now have a record amount of credit card debt — nearly $988 billion, according to the most recent Federal Reserve data.


“With inflation running high for nearly 40 years, many consumers have used credit to help manage their budgets, resulting in record or near-record balances,” said Michelle Ranieri, vice president of U.S. research and advisory at TransUnion. TransUnion's "Q1 2023 Credit Industry Insights Report."


On average, Americans carry about $5,733 in credit card debt, according to the most recent TransUnion report. But when you break it down by age, most carry more than that.


Those ages 40 to 49 have an average of about $7,600 in credit card debt — the highest percentage of any age group, according to TransUnion data provided to CNBC Make It.


"Gen Xers can be particularly affected by credit card debt because they're living out very expensive years right now," Ted Rossman, senior industry analyst at Bankrate.com, told CNBC in January. “They may be caught between caring for aging parents and raising their children — perhaps even putting them through university.”


On the other hand, younger credit card users ages 18 to 29 have roughly $2,900 in debt, according to TransUnion data. This is understandable since most people in that age group are just starting to use credit cards.


That's the average credit card debt Americans carry in each lifetime, according to TransUnion.

Credit card debt is becoming more expensive thanks to higher interest rates

"More people are taking on more debt, and those balances are costing more than ever," Rossman tells CNBC Make It.


Not paying your credit card bill in full each month is getting more and more expensive. Interest rates currently hover just above 20%, according to Bankrate analysis on May 31. This time last year, credit card interest rates were around 16%, on average.


This is due to the numerous interest rate increases by the Federal Reserve since March 2022. Since raising interest rates makes it more expensive for consumers to borrow money, the Fed has continued to increase them in an effort to slow inflation.


How to start paying off your credit card debt

Although credit card debt is often caused by practical things like emergencies or the costs of everyday living, it can be hard to stop accumulating more debt once the cycle starts, says Rossman.


If you're starting to feel like your credit card debt is unmanageable, here are two reward strategies you can try.


0% balance transfer credit card

Signing up for a 0% balance transfer card is Rossman's top tip for dealing with credit card debt. (Check out this list of the best balance transfer cards from CNBC Select.)


0% balance transfer credit card

Signing up for a 0% balance transfer card is Rossman's top tip for dealing with credit card debt. (Check out this list of the best balance transfer cards from CNBC Select.)


If your card has a high APR, these types of cards will allow you to transfer that debt to a new card with a 0% APR introductory period that can last up to 21 months. This will allow you to get out of your debt without incurring interest charges each month.


Rossman recommends dividing the total amount you owe by the number of months in the interest-free period to come up with a flat payment plan that you can stick to.


Consolidate your credit card debt

If you have multiple balances on different credit cards, a personal loan can be a useful form of consolidation, Rossman says. (Check out this list of the best debt consolidation loans from CNBC Select.)


This strategy involves applying for a personal loan large enough to cover your total debt. If approved, you can pay off your credit cards immediately, and then pay off the loan at a better rate. The average interest rate for personal loans was just over 11% as of May 31, per bank.


If you have a strong credit score, you may be able to get a personal loan with an interest rate as low as about 7% and pay it back over five to seven years, Rossman says.


It is important to note that your credit score may be affected if you miss a payment, and once you have run out of all the money from your personal loan, you will need to apply for another loan to receive more money.

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