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. That’s important because the latest news may seem encouraging, but the complete picture is not pretty.
Americans repaid $40.8 billion in credit card debt during Q1 2018 – the second-largest quarterly payoff ever. But we added almost $38 billion back to our tab in Q3 and Q2 2018. We also began the year owing more than $1 trillion in credit card debt for the first time ever, after adding $87.3 billion to our tab in 2017.
So it’s not a question of whether consumers are weakening financially. It’s a matter of how long this trend will last and just how bad it will get.
Outstanding credit card debt is at the second-highest point since the end of 2008, after reaching an all-time record high for a third quarter in Q3 2018.
The $38 billion in credit card debt added during Q2 and Q3 2018 has nearly wiped out consumers’ large first quarter pay-down.
We ended 2017 with $87.3 billion in new credit card debt, and WalletHub projects a $70 billion increase in 2018 by the end of the year.
Since the end of the Great Recession, consumer performance has regressed on a year-over-year basis in six out of every ten quarters.
At 3.46% for Q3 2018, the charge-off rate is up nearly 2.7% year over year.
Average Credit Card Debt per Household
|Stat||Q3 2018||Q3 2017||Percent
|Average Credit Card Debt per Household||$8,284||$8,107||2%|
|Total Credit Card Debt||$974.20||$949.90||3%|
|Quarter Net Increase||$16.10||$22.10||-27%|
The average household’s balance, at $8,284, is roughly $177 shy of being unsustainable.
Cities with the Most & Least Credit Card Debt
Nationwide, consumers added $16 billion in credit card debt during Q3 2018, pushing total balances to record levels for this time of year. Clearly, this is a ticking time bomb for the country’s economy overall. It’s also a sign of severe financial distress at the local level, multiplied across cities and towns coast to coast.
We’re not equally burdened by this credit card debt crisis. Below, you can see which cities have the most and least work ahead of them.
Cities with the Least Sustainable Credit-Card Debt
- Colleyville, TX
- Darien, CT
- Park City, UT
- Fairbanks, AK
- Summit, NJ
- Leawood, KS
- The Woodlands, TX
- Mill Valley, CA
- Needham, MA
- Sammamish, WA
Cities with the Most Sustainable Credit-Card Debt
- Carmel, IN
- Gainesville, TX
- Lake Forest, IL
- Bastrop, LA
- Allen, TX
- Madison, MS
- Coral Gables, FL
- Frankfort, KY
- Russellville, AR
- Southaven, MS
For the full list, please see our credit card debt payoff report.
- 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 – Q3 2018
|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 – Q3 2018:
*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.
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