Credit card debt is notoriously expensive, primarily because of the high interest rates and daily compound interest. This combination can cause balances to grow rapidly, making it difficult for many to pay off their debt. However, there is some positive news: according to New York Life’s latest Wealth Watch survey, all generations have managed to reduce their credit card debt since the end of 2023.
Despite this progress, one generation has the most credit card debt—and it may surprise you.
Baby boomers currently have the highest average credit card debt, with balances averaging $7,808.93. Gen X follows closely, with an average balance of $7,530.31. Meanwhile, millennials are doing slightly better, with an average debt of $5,370.06, and Gen Z has the lowest average balance at $1,707.52.
It’s important to note that Gen Z’s younger age and fewer years of earning experience may have influenced their lower debt levels, leading to lower incomes and credit limits.
Credit card debt is especially problematic for baby boomers because many are retired or nearing retirement. Managing debt payments can be challenging even with a regular paycheck, and it becomes significantly more difficult once regular income ceases. Therefore, it’s crucial for boomers to eliminate their credit card debt as quickly as possible.
One effective strategy for baby boomers to tackle their credit card debt is to leverage their home equity. According to the National Council on Ageing, Americans aged 65 and over have a median of $250,000 in home equity. By consolidating credit card debt into a home equity loan, boomers can benefit from significantly lower interest rates compared to those on their credit cards. Furthermore, a home equity loan’s fixed interest rate enhances the predictability and manageability of monthly payments.
Regardless of age or homeownership status, personal loans offer another viable option for consolidating credit card debt. Like home equity loans, personal loans typically come with fixed interest rates and steady monthly payments. This predictability can make debt management easier.
Additionally, personal loans do not put your home at risk if you fall behind on payments, unlike home equity loans, where missed payments could lead to foreclosure. While there are still negative consequences to missing personal loan payments, foreclosure is generally not one of them.
Carrying credit card debt is detrimental at any age. It’s essential to take proactive steps to reduce and eventually eliminate this debt. By considering strategies like home equity loans or personal loans, you can make your debt more manageable and less costly in the long run. Take action now to shed your credit card debt and improve your financial health.
