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2022 American Household Credit Card Debt Study

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2022 American Household Credit Card Debt Study

NerdWallet’s annual report shows credit card debt surging as the cost of living increases. Many Americans are worried about their finances for the coming year.

By Erin El Issa Senior Writer | Personal finance, analysis of data credit cards Erin El Issa writes data-driven research on personal financial matters, credit cards, investments, travel, as well as student loans. She loves numbers and aims to simplify data sets in order to help people improve their financial lives. Before becoming the Nerd in 2014, she worked as an accountant for tax and freelance personal finance writer. Erin’s work has been cited in The New York Times, CNBC, the “Today” program, Forbes and elsewhere. In her spare moments, Erin reads voraciously and is unable to keep up with her two kids. She is based in Ypsilanti, Michigan.

Jan 10 Jan 10, 2023

Editor: Paul Soucy Lead Assigning Editor Credit scoring, credit cards Personal financial planning Paul Soucy leads the credit cards content team at NerdWallet. He was an editor with the Des Moines Register, USA Today and Meredith/Better Homes and Gardens for more than 20 years. He later establishing an established freelance editing and writing practice. He edited the USA Today Weekly International Edition and was awarded the top honor of the year from ACES: The Society for Editing. He earned a bachelor’s in journalism, as well as a master of Business Administration.

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The past year has been a very expensive one: Living expenses is increasing faster than incomes, causing many Americans to borrow more to make ends meet. And interest rates that have increased in response to the rising cost of living are making debt costly.

NerdWallet’s annual look at household debt finds that the balances on credit cards carried from month to month have been increasing over the last 12 months, totaling an estimated $460 billion by September 2022 . Mortgages, auto loans and overall debt load also increased over the past year, while student loan debt fell little.

Here’s a breakdown of what U.S. households owed in all and the median amount for each household for every type of debt at the time of September 20, 2022:

The type of debt

The total amount owed by an typical U.S. household with this debt

Total owed in the U.S.

Percentage change of total owed between 2021 and 2022.

Any type of debt*

$165,388

$16.51 trillion

+7.65%

Kreditkartes (total)*

$17,066

$1.05 trillion

+15.17%

Credit cards (revolving)

$7,486

$459.6 billion

+28.73%***

Mortgages

$222,592

$11.67 trillion

+8.54%

Auto loans

$28,975

$1.52 trillion

+5.31%

Student loans

$58,238

$1.57 trillion

-0.64%

* This debt could include mortgages and lines of credit for home equity and auto loans, credit cards, students loans and other debts of the household as per the Federal Reserve Bank of New York. *Total U.S. credit card outstanding debt is comprised of transacting and revolving balances. Revolving debt was calculated with the help of the average over the last five years of percentage of credit card debt considered to be revolving (carried month to month) as opposed to transacting (paid monthly in full). The past few years, we’ve had these numbers from Experian. The credit bureau has declined to give the revolving and. transaction data for 2022.

A note about the data for this year

The increase of nearly 30% in credit card debt revolving (that is, credit card balances that are carried from month to month could be due to two things an increase of significant proportions in the total debt of credit cards (revolving and nonrevolving) and a larger proportion of the revolving debt. The total credit card debt increased by 15%. As the costs of living exceeding increase in income so it is only natural that a larger portion of the increase was in as a result of the revolving loans. This is only an estimate. We calculated it using the average percentage of revolving debt over the previous five years. This is more than the historically low revolving debt percentage of 2021 however it is similar to proportions prior to the COVID-19 pandemic.

Our annual report analyzes government data including such sources like those from the U.S. Bureau of Labor Statistics and the Federal Reserve Bank of New York — to see how the debt of households changes over the past year. NerdWallet also recently commissioned an online survey of over 2000 U.S. adults, conducted by Harris Poll. Harris Poll, to learn more about the way Americans think about their debt and what they expect to happen in the future when rates of interest will affect their finances. We also inquired about Americans who use “buy now buy later” services, as well as how your income (or hasn’t) kept up with inflation, and their financial worries for the year to come.

Key results

The price of food is increasing faster than incomes. In the past year, the median household income has grown just 4 percent, while overall cost of living has increased by 8percent . The study found that almost 50% of working Americans (45 percent) believe that their salaries haven’t been growing enough in the last twelve months to keep pace with the rate of inflation.

Buy now, pay later services may mean deeper debt for millions. Close to 1 in 5 Americans (18 percent) say they have utilized a BNPL service in the past 12 months.

Consumers are worried about finances over the next year. Nearly 7 out 10 Americans (69 percent) are concerned about financial matters over the coming year. The number. top concern is the need to go into debt/more debt to cover necessities (31%) The next concern is having to pay more rates of interest on debt (27%).

The amount of credit card interest paid by households is up because of recent Federal Reserve rate hikes and increasing amounts of credit card debt that is revolving. U.S. households that carry credit card debt will be paying an average of $1380 in annual interest . This is assuming interest rates don’t go higher.

“Credit card debt is usually considered as the outcome of frivolous purchases, but in the case of the majority of Americans it’s not the case,” says Sara Rathner, a NerdWallet credit cards expert. “Consumers feel the pressure of higher prices and the rising interest rates, and wages aren’t enough to keep up. That’s forcing many to make difficult choices, such as taking out loans to fund necessities.”

The cost of living exceeds earnings growth by a significant amount over the last year

Every year, we examine growth in the cost of living in comparison to the household income in the prior decade to see if income is keeping pace with expenses. In the 10-year period, we discovered that income is growing the pace: Median household income has grown by 44% over the past year however, the overall cost of living has been up by 28% in the same period . But the story changes radically when we look at the rapid growth in the short term, due to the COVID-19 pandemic and the extraordinary high rate of inflation.

Looking at growth over the last three years — pre-pandemic to now -the median income has increased by 7 percent, however overall costs have been up by almost 16percent . This includes a 27% rise in the cost of transportation and a 20 percent increase for food and beverages costs , and a 14 percent increase in housing expenses. And that may partly explain the reason, according to our survey, 45percent of Americans believe their financial health is less good when compared to prior to that COVID-19 epidemic.

According to the survey, more than half of employed Americans (45%) claim that their salaries haven’t increased enough over the past twelve months to keep pace with the rate of inflation. The consumer price index as well as income growth data back this up. In the last year, we’ve seen prices soar in the range of 8.2% annual inflation, as of September 2022. That includes 13% rise in transportation costs as well as 11% increase in drinks and food costs, and 8% increase in housing costs. In contrast, the the median household income has increased by 4% in this time .

Consumers are doing all they can to fight rising prices. According to the study more than 4 out of 5 Americans (79%) declare that they’ve implemented measures to combat rising prices over the last six months. In the past six months, 42% of Americans have said they’ve driven less, and 39% of them say they’ve purchased more store brands and unprocessed essentials. Close to 1 in 5 Americans (19%) claim they’ve added more debt due to the rise in inflation over the past six months.

” Checking your recent spending for places to cut back and then putting the extra funds towards savings or debt repayment can be a big help. ” Sara Rathner , NerdWallet credit cards expert

Debt is making Americans feel overwhelmed, anxious and stressed

In the last year, more than 3 out of 10 Americans (28 percent) declare that their overall debt has risen, with 14% of Americans saying they’ve taken on medical debt during this period. This debt is taking a toll.

According to the survey that 41 percent of Americans who are currently in debt feel anxious about it, and 35% of them feel overwhelmed. This feeling of being overwhelmed is more prevalent in Americans who earn a household income of less than $75,000, who are currently in debt: 44% of the population feels this way, against 27% of debt-laden Americans with annual household incomes of $75,000 or more.

BNPL may be hiding additional debt

Our annual household debt analysis examines the traditional types of debt including mortgages, credit cards as well as student loans. The data on these debts is compiled and reported by government agencies like the Federal Reserve Bank of New York. But the issue of debt may get worse due to the proliferation of short-term loans that are offered by firms such as Affirm or Klarna. BNPL services allow you to purchase something today and make installment payments -typically 25 percent at the time of purchase and 25% every two weeks until the loan is paid off. More long-term BNPL options typically have a fee for interest, similar to an installment loan.

Based on our research roughly one-in-five Americans (18 percent) had used a BNPL service in the last 12 months. This situation is more prevalent in younger Americans: 25% from Gen Zers (ages between 18 and 25) and 30 percent of young adults (ages between 26 and 41) have used these services in the past year, as opposed to 16 percent from Gen Xers (ages 42-57) and 7 percent of baby boomers (ages between 58 and 76).

Certain Americans depend heavily on BNPL service to purchase daily necessities such as things that get exhausted before they’re paid for. According to a September 2022 report from the CFPB or CFPB the use of BNPL services for daily or essential purchases — like gasoline, food and utilities — increased by 434% from 2020 to 2021, and increasing by 1,207% between the years 2019 and 2020.

BNPL services are usually interest-free however, they can charge late fees for people who fail to pay. The CFPB report revealed that 10.5% of BNPL clients were charged at the very least one late fee by 2021. And while late fees tend to be small — around $7 for an typical loan balance of $135 -the report points out possible downsides of the services, which could be financially unsound, such as overextending, and the taking of more loans than you can reasonably manage.

For those who only use occasionally BNPL, overextension probably won’t be a problem. For those who pile loans and take on several loans within a short amount of time — and who are regular BNPL users, these payment obligations can affect your ability to make other bills promptly due to the volume of BNPL payments they have to pay. This can result in late fees, interest charges and even damage to credit scores.

Many Americans are bringing financial stress in the year ahead

The last year has been expensiveand many don’t believe things will improve over the coming year. Nearly 7 in 10 Americans (69%) have financial concerns about the next 12 months, with a top concern being having to go into debt, or even deeper into debt to pay for necessities (31%).

Over 25% of Americans (27%) are concerned about having to pay higher rates of interest on their debt in the coming 12 months. this comes after a series of rate hikes from the Federal Reserve and the possibility of further rises in 2023.

Credit card interest rates are increasing and could be higher.

This action by the Federal Reserve has increased the average interest rate on accounts incurring interest to 18.43 percent in August 2022, according the Federal Reserve Bank of St. Louis. It is now the most rate since the St. Louis Fed began tracking this data in 1994. For American households carrying their average credit card debt that is revolving it would cost an annual interest charge of $1,380. The year before, average interest charges were $1,029 annually due to lower credit card debt that is revolving and lower interest rates.

During the year 2022 Americans were treated to seven interest rate increases from the Fed and more may be expected in 2023. According to the study that more than 3 out of 5 Americans (61 percent) believe that future rate increases will impact their finances, whether for good or for ill. However, while 30 percent of Americans think it will make their current credit more expensive, and 28% think it will make the new borrowing more expensive, 1 of 5 Americans (20%) think they’ll earn more interest on their savings.

What can Americans can do?

Prepare yourself for a possible recession. At present, a recession hasn’t been declared officially, however some experts suggest that we’re currently in one or is coming soon. If you do know that the coming recession is imminent it’s difficult to anticipate what’s coming due to the fact that the effects of a recession don’t seem to be common nor universal. Moreover, the uncertainty could quickly escalate into calamity. The last few years have provided ample evidence of the importance of being prepared for unexpected events and there are strategies to minimize the damage to your financial health.

If you’re in a position do so, you should add funds to your savings regularly. This could mean continuing to create an emergency fund that covers 3 to 6 months’ worth of expenses or even making savings higher than that for the eventuality of longer-term income loss. To have more funds to invest in savings, look at your budget and consider what you can cut. You don’t have to reduce your spending for a lifetime In the short term it will help you beef up your savings faster.

“If you think that a few months’ worth of expenses is too much for you to be able to set aside, try to aim at a few hundred dollars in an emergency savings account,” NerdWallet’s Rathner advises. “It can be extremely useful when you’re faced with unexpected expenses.”

” You can’t control the global economy however, you can take even small steps to be financially secure now. ” Sara Rathner , NerdWallet credit card expert

It is better to pay now than later, if you are able to. Utilizing a buy now pay later service may be right for you, but before you use one, look at other options. If you have enough money to pay off the balance, placing the amount to a credit card could get you rewards, and also safeguard your purchase in case of a defective or return product. It’s also beneficial to save for nonessentials over the course of six weeks — which is the normal BNPL timeframe — before making the purchase. You might find that you don’t longer care to buy the item after a certain amount of time has expired.

If you decide to utilize BNPL services, set automatic payments in order to avoid late fees and limit the amount of purchases you make in an unspecified time to avoid getting overwhelmed.

Avoid major financial decisions If you can, avoid major financial moves. Due to consumer worries about higher interest rates and credit becoming more difficult to get access to, and decreasing credits, it is possible that you may want to hold off on accepting new credit obligations as long as you can. This may not be feasible for you, and that’s OK; sometimes we just can’t wait for the right moment particularly in times of financial difficulties. But if you can hold back from making any major financial moves then it’s probably a good idea to do so.

“This is a good time to review the basics of financial management,” Rathner says. “Checking your expenditure for places to cut costs and then putting the extra funds to debt or savings can be a big help.”

Learn how rising interest rates impact you. A majority of Americans (21%) aren’t sure whether future rate hikes will affect their financial situation, as per the study. If you’re in the market for high-interest loans that are variable, such as credit cards , an equity credit line -or you have money in a savings account, higher rates could affect your finances. Same applies to new credit with fixed rates like a mortgage or auto loan.

Rate increases could make your debt more costly however they can also make your savings grow faster. If you have variable-rate debt, aim to make more frequent or higher-quality payments to reduce it more quickly. Avoid applying for large loans with fixed rates as well, if you can -high rates can make large purchases, such as a house or car, vastly more expensive. If you have a savings account, look up the interest rate. Rates were incredibly low up to a point, but today, you can get annual percentage rates, also known as APRs, that are 3percent or more.

“The risk of uncertainty in the economy is always a source of anxiety,” Rathner says. “You can’t manage the economy at large, but you can take the smallest steps to feel more financially secure right now.”

Methodology

The survey was conducted online in the United States by The Harris Poll on behalf of NerdWallet from October. 25-27, 2022 among 2,041 U.S. adults 18 and older. The sampling precision of Harris surveys conducted online is assessed by using a Bayesian credible interval. For this study the sample data is accurate to within +/- 2.8 percentage points using a 95% confidence level. To learn more about the methodology of this survey that includes weighting variables and sizes of subgroups, contact Lauren Nash at .

The analysis of NerdWallet’s includes data from these sources:

September 2022, data by the Federal Reserve Bank of NY’s Center for Microeconomic Data.

December 2021, taken from The U.S. Census Bureau.

from members of the Board of Governors of the Federal Reserve System.

September 2022, data from The U.S. Bureau of Labor Statistics.

December 2021, as reported by The U.S. Census Bureau.

, September 2022, in the U.S. Bureau of Labor Statistics’ National Compensation Survey.

August 2022, from August 2022, from the Federal Reserve Bank of St. Louis.

Expand to footnotes for footnotes

[1] The credit card that is revolving analyzed differently than other household debt. It is the Federal Reserve Bank of New York utilizes data from Equifax, one of the three largest credit reporting agencies in the U.S., as the source for the data on credit card debt and includes revolving balances (debt that is carried from month to month) and balances that are transacted (debt that will be paid off in the next statement). The past few years, we’ve relied on data of the credit bureau Experian to calculate the percentage of balances which were revolving and transacted on bank credit cards. Experian hasn’t provided information for 2022 therefore we utilized the average of percentages from 2017 to 2021. The information on the revolving balances of retail credit cards was not available, so we assumed that cardholders revolved debt on retail credit cards and bank credit cards in the same way. Then, we multiplied total outstanding balances on credit cards within the U.S. — $1.05 trillion at the time of September 2022 by the proportion of debt that was revolving. (According according to New York Fed, the majority of households in the country had outstanding debt on credit cards of 925 billion as of September 2022, which includes bank credit cards , but they do not include retail credit card debt. To make this figure more representative of the total creditors, we took the $925 billion and added that figure to 25 percent of the reported “other” debt. The New York Fed says about a quarter of so-called other debt is outstanding credit card balances.) Then, we divided the sum by the number of households carrying the revolving credit card debt. We estimated the number of household members by multiplying number of U.S. households, projected based on data that were released at the end of 2021. We then divided that number by the proportion of households that have this debt (using 2022 estimates based on data from 2019 taken from the Fed’s Survey of Consumer Finances).

2] To estimate household debt for each category — with the exclusion of revolving credit cards debt, we calculated the average amount for each kind of debt that was reported to the Federal Reserve Bank of New York and then divided this amount by the total number of houses that have the same kind of debt. We estimated the number household debt by multiplying total number of U.S. households, projected from data that was that were released at the end of 2021. We then divided that number by the percentage of households holding that debt, based on data that were collected from the Survey of Consumer Finances.

[3] Consumer price indexes, also known as CPIs track changes in the price of a set of consumer goods and services. The price indexes that we examined comprise prices for clothing education and communication, food and beverage and food from home taken away from home, housing, medical, other goods as well as services, recreational activities and transportation. Based on the U.S. Bureau of Labor Statistics the price index of all goods and services increased from 274.214 and then 296.761 in the period between September 2021 to September 2022. Transportation CPI rose from 237.107 to 267.043, food and beverage CPI was up from 280.413 and reached 310.635 while housing CPI was up from 283.532 up to 306.323 between September 2021 and September 2022. To assess the growth in the categories of price indexes and the growth in income in 2012, we have projected the 2022 median household income using the 2021 median reported income of $70,784, and then increasing or decreasing it by the percentage changes that occur quarterly in the Bureau of Labor Statistics’ Employment Cost Index data for civilian workers. Based on census data the median household income was $70,784 by 2021 and our projections indicate the median household income to be $73,653 in 2022.

4. To calculate interest rates on credit cards over the period of one year, we applied our estimate of revolving credit card debt and data about the average interest rate on credit card accounts that are assessed interest from the Federal Reserve Bank of St. Louis from August 2022. With a steady balance, we multiplied the average revolving credit card debt for households that have credit card debt by the average APR. This is only an estimate; for simplicity our calculations do not account for any fluctuating or daily compounding balances.

5 Based on the U.S. Bureau of Labor Statistics, the price index for all goods grew from 231.015 up to 296.761 between September 2012 between September 2012 and September 2022. Based on census information the median household earnings of $51,017 was recorded in 2012. our projections predict the median household income to be $73,653 by 2022.

6. Based on the U.S. Bureau of Labor Statistics the price index for all goods was up by 256.596 to 296.761 between September 2019 to September 2022. Transportation CPI was up by 209.896 to 267.043 Food and beverage CPI was up by 258.59 up to 310.635 as well as housing CPI was up by 267.555 up to 306.323 in the period between September and September 2022. Based on Census data the median household income was $68,703 in 2019 and our projections project an average household income of $73,653 for 2022.

About the author: Erin El Issa is a credit card expert and writer on studies at NerdWallet. The work she has written for NerdWallet was highlighted on USA Today, U.S. News and MarketWatch.

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