Credit Card Debt Study: Trends & Insights
Credit card debt statistics speak to the financial health of American households. They can also foreshadow over-borrowing bubbles, changes to lending standards, and other trends with the potential to impact our wallets. And the latest news is not good.
Americans now owe more than $1 trillion in credit card debt for the first time ever, after adding a post-Great Recession record $92.2 billion to our tab in 2017. Only four times in the past 30 years have we spent so much in a year. And in each of those prior cases, the charge-off rate – currently hovering near historical lows – rose the following year. There wasn’t nearly as much kindling on the fire, either.
So it’s not a question of whether consumers are weakening financially, but rather how long this trend toward pre-recession habits will last and just how bad it will get.
At more than $1 trillion, outstanding credit card debt is at the highest point ever.
The $67.6 billion in credit card debt that we added in Q4 2017 is the highest quarterly accumulation in the last 30 years – 68% higher than the post-Great Recession average.
We ended 2017 with $92.2 billion in new credit card debt, most for a year since 2007 and 105% above the post-recession average.
Since the end of the Great Recession, consumer performance has regressed on a year-over-year basis in two out of every three quarters.
The fact that charge-off rates remain near historical lows continues to fuel lenders’ appetites for extending credit, but there will be a tipping point eventually.
Average Credit Card Debt per Household
|Stat||Q4 2017||Q4 2016||Percent
|Average Credit Card Debt per Household||$8,600||$8,131||+6%|
|Total Credit Card Debt||$1008.5 billion||$950.20 billion||+6%|
|Quarter Net Increase||$67.6 billion||$58.20 billion||+16%|
The average household’s balance, at $8,600, is $138 higher than the level WalletHub has identified as being sustainable.
Make a Budget & Stick to It: It’s difficult to spend within reason or plan savings if you don’t know how your monthly spending compares to your take-home pay, or where that money is going. That is why you should rank-order your expenses – including debt payments, emergency fund contributions and other savings – and trim the fat, if necessary.
Most importantly, once you develop your budget, make sure to stick to it or else you’ll have simply wasted your time.
- Build an Emergency Fund: With a safety net of cash to fall back on, you won’t be as likely to fall behind on your bills in the event of emergency expenses or unplanned joblessness. Your goal should be to gradually save about a year’s worth of after-tax income. In other words, set aside a little bit every month until you’ve got a nice cushion.
Improve Your Credit: This might sound a bit counterintuitive, seeing as more credit could mean more debt. But improving your credit standing will have a dramatic impact on the cost of your debt. And reducing the cost of your debt will allow you to pay it off faster. Better credit can also make it easier to find a job or a place to live, both of which impact your bottom line.
You can check your latest credit score for free and get personalized credit-improvement tips on WalletHub.
Try the Island Approach: The Island Approach is a strategy that involves using a collection of credit cards, with each serving a specific purpose. For example, you could transfer your existing debt to a 0% balance transfer credit card to save on finance charges and get out of debt sooner. And you could use a rewards card or two – perhaps one with travel rewards and one with cash back, or maybe a store credit card – for purchases that you’ll be able to pay off by the end of the month.
This will enable you to get the best possible collection of terms. It will also tell you when you’re overspending. Finance charges on your everyday spending cards will signal a need to cut back.
- Repay Your Most Expensive Debt First: Most people with serious credit card debt have multiple balances. If that’s the case for you, try the “avalanche method.” That means putting the majority of your monthly debt payment toward the balance with the highest interest rate and making the minimum payment required on the rest. Once your most expensive debt is paid off, repeat the process until you’re debt-free.
Evaluate Your Job Situation: In some cases, all the budgeting and planning in the world won’t be enough to solve your debt problems. You may need to explore whether higher-paying opportunities exist for people with your background or consider acquiring some new skills to make yourself more marketable.
This may require a bit of an investment in yourself, but as long as you get a worthwhile return, it’s money well spent.
Net Result of Consumer Credit Card Debt Q1 2008 – Q4 2017
|Net Result in Debt Load||Relative to Same Period
|Relative to Same Period Two Years Ago|
Net Result in Debt Load – Green indicates that consumers decreased their debt relative to the previous quarter. Red indicates they increased their debt relative to the previous quarter.
Relative to Same Period – Green indicates that consumers either paid down more debt or accumulated less debt than they did in the previous two years. Red indicates that they either paid down less debt or accumulated more debt than they did in the same quarter in the previous two years.
Consumer Credit Card Debt and Charge-off Data (in Billions) Q1 1986 – Q4 2017:
*Numbers may differ from year to year due to the fact that the Federal Reserve regularly retroactively updating figures. Questions or requests for information can be directed to our media department.
Cities with the Most & Least Sustainable Credit Card Debt
99th Percentile = Most Sustainable Credit Card Debt