Younger Americans carrying unprecedented amount of credit card debt

Researchers have found that younger Americans are carrying an extraordinary amount of credit card debt, as compared to their parents at the same age.

It’s all fun and games until the bankers decide the game is over. Credit is something my parents rarely used, besides purchasing a house, but it’s something that has become more and more common for the younger generation.

As we all know – check that, as “many” of us know – when the music stopped in 2008 because of the Wall Street crash, millions of Americans were left with loads of debt and no possible way of digging out of it. Everyone knows how easy it is to just drop a purchase on a credit card and deal with it later, but as your parents may have said, “don’t do it.”

We’re still not out of the woods with the economy, and earnings continue to lag, so those purchases won’t be any easier when they’re paid out over time.  And you’ll have exorbitant interest rates making the purchase that much more expensive than you planned.  Credit card debt: don’t do it.

Reuters has more on the credit habits of those in their late 20s and early 30s.

ecommerce, shopping, computer credit card debt

Credit card debt via Shutterstock.

Researchers that people born between 1980 and 1984 have on average $5,689 more debt than their parents had at the same stage of their lives, and $8,156 more than their grandparents.

“If what we found continues to hold true, we may have more elderly people with substantial financial problems in the future,” said Lucia Dunn, a co-author of the study and a professor of economics at Ohio State University.

Our projections are that the typical credit card holder among younger Americans who keep a balance will die still owning money on their cards,” she added in a statement.

Very scary thought.


An American in Paris, France. BA in History & Political Science from Ohio State. Provided consulting services to US software startups, launching new business overseas that have both IPO’d and sold to well-known global software companies. Currently launching a new cloud-based startup. Full bio here.

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  • http://www.debtconsolidationcare.com/User/sally.nachelle Sally Nachelle

    Thanks for sharing this informative and well-researched article. The best way to avoid credit card lawsuit is to stay away from delinquent credit card debts. You can avoid delinquent debts by making regular payments on your credit cards. Credit cards are definitely an important business to the banks. There is no doubt about it. If you’re finding it difficult to make payments on the credit cards, then it is better to pay it off through cash. The person who has more than one credit card is always suffering from debt burden. The main reason behind that is they spend beyond their means as they need not to carry any cash with them. Credit card is very convenient to use.

  • Sweetie

    What would this site do without such breathtakingly substantive posts?

    troll

  • bejammin075

    You can buy lots more stuff if you DON”T use credit. All that money in interest is money you could have spent on yourself, rather than making Visa rich.

  • lynchie

    Totally agree. Housing is more expensive. People are buying houses at younger ages because of lax rules on mortgages. Student loans are higher when state schools are $25K plus a year. This is reflective on nothing like reality. A better look is average americans debt load lets look at that and than do a little work to compare dollars in the 1980 to now. I am sure the debt load is high but this doesn’t really reflect on young people in the main.

  • http://adgitadiaries.com/ karmanot

    It’s the new Capitalism: debt as asset.

  • http://adgitadiaries.com/ karmanot

    One of the worst impacts of this diseased country is on millions of children who go hungry everyday.

  • http://adgitadiaries.com/ karmanot

    Duh

  • Sweetie

    I’ve been there myself. I ate spaghetti without sauce because I couldn’t afford sauce. I took a multivitamin and tried to get a hamburger once in a while for protein.

    But, there is certainly nothing admirable about this austerity. America loves to mythologize about it… the old “pull yourself up by your bootstraps” nonsense.

    It’s bad for people and bad for the society. My body is like an old man’s in some respects, probably from the effects of malnutrition.

    I knew I couldn’t make credit card payments so I didn’t use one. I didn’t even apply for any. But, putting people in this situation is not good for anyone. Even the rich don’t ultimately benefit because humanity progresses as a whole, with more rapid progress being in a paradigm that involves the maximized labor potential of each person. That can’t be had unless people have the resources they need to achieve.

  • Naja pallida

    You don’t have to tell me… I spent the whole of college about 30lbs underweight. I also only slept about 3-4 hours a night, if I was lucky. I don’t think I could even manage to live like that anymore even if I was forced to… but it was either that, or not go to school. I didn’t qualify for financial assistance, and I wasn’t one of those kids who spent high school thinking about scholarships. So I just worked my ass off, had a few miserable years, but got through it.

  • Sweetie

    Ramen noodles + condiment packets = malnutrition.

  • Naja pallida

    Debt has become a way of life in this country. When I was in college, working full time while going to school full time, and basically living on ramen noodles made less shitty by condiment packets I stole from nearby restaurants, I was receiving offers for “student” credit cards, at least once a week. It was a temptation that I couldn’t resist, and got one telling myself it would only be for emergencies and that I needed to start building my credit. Of course, when you’re living that way, you start to see the credit card as a means of paying for things that you shouldn’t be able to afford. Which, of course, I did. I managed to stop myself before it got out of hand, but I could have very easily screwed up badly. Must say though, it was nice to eat well for the time it lasted.

    Now imagine coupling that with student loan debt. Then, when someone gets out of college, they get a job and buy a house, adding mortgage debt. Want a car? Get a car loan or lease. We’re a society that refuses to push a living wage, but yet continues to make everything we need on a daily basis more and more expensive. Then with the economic collapse, and widespread unemployment, many people saw their savings evaporate (if they had any to begin with) and instead rely on credit cards to pay the daily expenses. Then we go out of our way to make it difficult for individuals to declare bankruptcy, and to make it even easier for banks to foreclose on homes, to make sure that people thoroughly punished for being irresponsible – when in most cases, they were just trying to live.

  • Sweetie
  • Sweetie

    Blodget in 2011:

    “Remember when we bailed out the banks? Yes, and remember the REASON we were told we had to bail out the banks? We had to bail out the banks, we were told, so that the banks could keep lending to American businesses. Without that lending, we were told, society would collapse… So, did the banks keep lending? Um, no. Bank lending dropped sharply, and it has yet to recover.

    So, what have banks been doing since 2007 if not lending money to American companies? Lending money to America’s government! By buying risk-free Treasury bonds and other government-guaranteed securities.

    And, remarkably, they’ve also been collecting interest on money they are NOT lending—the ‘excess reserves’ they have at the Fed. Back in the financial crisis, the Fed decided to help bail out the banks by paying them interest on this money that they’re not lending. And they’re happily still collecting it.

    Meanwhile, of course, the banks are able to borrow money FOR FREE. Because the Fed has slashed rates to basically zero. And the banks have slashed the rates they pay on deposits to basically zero. So they can have all the money they want—for nearly free!

    When you can borrow money for nothing, and lend it back to the government risk-free for a few percentage points, you can COIN MONEY. And the banks are doing that. According to IRA, the ‘net interest margin’ made by US banks in the first six months of this year is $211 Billion. And that has helped produce $58 billion of profit in the first six months of the year.

    And it has helped generate near-record financial sector profits—while the rest of the country struggles with its 9% unemployment rate.

    And these profits are getting back toward a record as a percentage of all corporate profits.

    And those profits, of course, are AFTER the banks have paid their bankers.

    This average Wall Street salary was 6X the average private-sector salary.”

  • Sweetie
  • perljammer

    Stagnant wages don’t help, but the real problem is habitually treating credit cards as sources of expendable income rather than cash flow management tools or emergency resources. And by “emergency”, I don’t mean “I want this thing that I can’t afford”, but “I have no choice but to pay for this, and there isn’t any other option.”

  • Drew2u

    So what’s the link between this article, Chris, and your literally previous article of the working poor?

  • brooks

    I’m confused by this sentence, “Researchers that people born between 1980 and 1984 have on average $5,689 more debt than their parents had at the same stage of their lives, and $8,156 more than their grandparents.” That doesn’t say Credit card debt, just debt. Makes sense because credit cards were only invented in the 50s. So that includes debt of school loans and house loans which are easier to get younger now because only 10% downpayment is required instead of 20-30% of not to long ago. I’m 30 and own my house as do many of my friends. So I have 100,000 in debt, but it’s not irresponsible considering I have 27 more years left on the loan. And with many more people going to school then their grandparents, they might be acquiring more debt for an education, which is obviously more expensive. Credit cards are abused by young people, but I just think these numbers are a little screwed.

  • Houndentenor

    Beyond the personal financial problems of the debtors, this is potentially a far greater threat to our economy than the federal debt, or at least a problem that could blow up far sooner. Carrying balances is bad enough when everything is going well. If people who are working full time are going into debt to get from one month to the next, then what happens when they lose their job? Default. Many experts claim that the potential of massive credit card defaults could be far worse than the mortgage meltdown from a few years ago.

    The solution is simple, but painful. Get out of debt, especially credit card debt. Cut expenses to the bone and pay down those balances. When you start looking at what it costs to carry balances, it’s the only thing that makes sense. The banks are thrilled if you just make the minimum payment. They can’t get 20% or in many cases MORE interest on anything else except credit card debt. that’s why they push credit cards so hard, especially on young people. Stop the insanity.

  • BrianG

    The problem is stagnant wages. Median wages have been flat since the 1970s in spite of the vast productivity gains. Besides wage stagnation taxation has shifted downward from the more progressive tax rates of the New Deal-Great Society era. To top it off the public goods such as state subsidized higher education have been slashed as part of the neoliberal agenda.

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