A recent Bankrate survey has unveiled alarming statistics, revealing that one in three Americans faced the challenge of having more credit card debt than savings in 2023 and 2024. Despite a cooling inflation rate and a robust job market, citizens continue to grapple with credit card payments, leading to record-high credit card balances reaching over $1 trillion at the end of 2023, according to the Federal Reserve Bank of New York.
Wilbert van der Klaauw, an economic research advisor at the New York Fed, expressed concern over the rising trend of credit card and auto loan delinquencies, particularly affecting younger and lower-income households. This surge signals heightened financial stress among these demographics.
A recent Bankrate survey further disclosed that approximately 36% of U.S. adults reported having more credit card debt than emergency savings. Interestingly, the burden of credit card debt versus emergency savings disproportionately affects Millennials and Gen Xers, with these generations more likely to face this financial predicament.
Bankrate Chief Financial Analyst Greg McBride emphasised the shifting priorities of Americans in response to the challenging economic climate. “Recognising that the cost of carrying debt has increased significantly in the past two years and the insufficient level of emergency savings, more Americans are focusing on paying down debt and boosting emergency savings simultaneously, rather than one to the exclusion of the other,” he stated.
Despite the financial challenges, the survey indicates that 36% of Americans are actively working towards paying down their debt and increasing their emergency savings.
According to 2022 data from the Federal Reserve Bank of New York and the U.S. Census Bureau, the average American household carries a credit card debt of $7,951 annually. Credit card balances saw a 4.6% increase of about $50 billion in the fourth quarter of 2023, with credit card delinquencies also rising.
While the U.S. economy maintains overall stability, New York Fed researchers point to areas where Americans are overextended, including higher prices for essential commodities such as food, gas, and housing, contributing to the escalating credit card debt crisis.
Breaking down credit card debt by generation, Generation X emerges with the most significant average credit card balances at $8,134. Other generations follow, with Baby Boomers at $6,245, Millennials at $5,649, the Silent Generation at $3,316, and Generation Z at $2,854. Notably, Generation X experienced the highest increase in debt between 2021 and 2022, while the Silent Generation added the least amount.
As Americans grapple with these financial challenges, experts recommend focusing on reducing credit card debt while bolstering emergency savings to establish a more secure financial future.
