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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 study finds that credit card debt is growing in tandem with the rising cost of living. Additionally, many Americans are concerned about financial issues in the year to come.

Written by Erin El Issa Senior Writer | Personal finance, analysis of data, credit card Erin El Issa writes data-driven studies on personal financial matters, credit cards, investments, travel, as well as student loans. She is a fan of numbers and hopes to demystify data sets to assist consumers in improving their finances. Before becoming the Nerd during 2014, she was a tax accountant and freelance personal financial writer. Erin’s work has been cited as a result by The New York Times, CNBC, on the “Today” program, Forbes and elsewhere. In her spare moment, Erin reads voraciously and struggles to keep up with her two kids. Her home is in Ypsilanti, Michigan.

Jan 10 Jan 10, 2023

Edited by Paul Soucy Lead Assigning Editor Credit cards, credit scoring, 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 over 20 years. He later establishing his own successful freelance writing and editing business. He edited his work for the USA Today Weekly International Edition and was awarded the most prestigious distinction from ACES: The Society for Editing. He holds a bachelor’s degree in journalism and a Master of Business Administration.

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This year has been a costly one: The cost of living has risen more quickly than incomes, which is forcing many Americans to take on more debt in order to pay for their expenses. The interest rates have risen in response to inflation are making borrowing more costly.

The annual report of NerdWallet’s study of household debt finds that the balances on credit cards carried from month to month have been increasing over the last twelve months, reaching approximately $460 billion by September 2022 . Mortgages, auto loans and total debt also increased over the past year, and student loan debt dropped slightly.

Here’s a breakdown of the amount U.S. households owed in total , and the average amount per household with each 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 amount of debt

Total owed in the U.S.

Percentage change for 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 may include mortgages and home equity lines of credit and auto loans credit cards, students loans and other debts of the household according to 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 by 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) instead of transacting (paid monthly in full). The past few years, we’ve had these figures from Experian. The credit bureau refused to provide the revolving vs. transacting data for 2022.

A note on the data for this year

The 30% rise in credit card debt that is revolving which is credit card balances that are carried from month to month could be attributed to two things an increase of significant proportions in total credit card debt (revolving and nonrevolving) and a higher estimated proportion of the revolving debt. Credit card debt total rose by 15 percent. As the costs of living exceeding increase in income It is logical that the majority of that increase came in the form of revolving loans. This is merely an estimate. We have calculated it by using the average percent of revolving debt over the last five years. This figure is higher than the historically low revolving debt percentage of 2021, but is similar to percentages from prior years before the COVID-19 pandemic.

Our annual report examines data from the government that come from sources such as those from the U.S. Bureau of Labor Statistics and the Federal Reserve Bank of New York to determine how household debt has changed over the course of the year. NerdWallet also recently commissioned an online survey of over 2,000 U.S. adults, conducted by Harris Poll. Harris Poll, to learn more about how Americans think about their debt, and how they think future rates of interest will affect their financial situation. We also inquired about Americans who use “buy now, and pay over time” services, and how their income has (or not) kept pace with inflation, as well as their financial worries for the coming year.

Key findings

The price of food is increasing more quickly than incomes. Over the last year, the median income of households has grown just 4 percent, while total cost of living has been up by 8percent . The survey found that nearly half of employed Americans (45%) say their pay hasn’t increased enough over the past 12 months to keep up 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 employed a BNPL service within the last 12 months.

The American public is worried about their finances in the coming year. Nearly 7 in 10 Americans (69 percent) have financial concerns about the next 12 months. The No. 1 worry is having to borrow more or take on borrowing to meet the needs (31%), followed by paying higher rates of interest on debt (27%).

The average amount of interest on credit cards that households pay is increasing because of recently announced Federal Reserve rate hikes and the increasing amount of revolving credit card debt. U.S. households that carry credit card debt will pay an average of $1380 in the interest rate this year . And that’s assuming interest rates don’t rise.

“Credit card debt is often believed as the outcome from frivolous spending, but for many Americans, that’s just not an accurate statement,” says Sara Rathner who is a credit card NerdWallet expert. “Consumers are feeling the pinch of increased prices and rates of interest, and their paychecks aren’t enough to keep up. That’s forcing many to make difficult decisions, such as borrowing to cover the costs of living.”

Cost of living outpaces 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 determine whether income is in line with expenses. When using that 10-year time period, we discovered that income growth is on the rise: Median household income has increased by 44% since 2012, while the overall cost of living has grown by 28% over the same period . But the story changes radically when we look at the quick-term growth due to the COVID-19 pandemic and the unusually high rate of inflation.

Looking at growth over the last three yearsfrom pre-pandemic until now- median income has grown by 7%, however overall expenses have been up by almost 16percent . This includes a rise of 27% in the cost of transportation as well as a 20% rise for food and beverages costs and a 14% rise in the cost of housing. That could explain the reason, according to our study, 45% of Americans think their overall financial health is worse now as compared to before that COVID-19 epidemic.

In the survey, nearly 50% of working Americans (45%) believe that their wages haven’t been increasing enough in the last 12 months to keep up with the rate of inflation. The consumer price index and data on income growth back this up. Over the past year, we’ve seen prices soar — 8.2% annual inflation, in September 2022. It includes an increase of 13% increase in transportation costs as well as 11% increase in drinks and food costs, and 8% in the cost of housing. In contrast, the households’ median income has risen by 4% in this period .

Consumers are doing everything they can to fight rising prices. According to the study almost 4 out of five Americans (79 percent) say they have implemented measures to combat rising prices over the last six months: 42 percent of Americans claim they’ve driven less and 39% say they’ve bought more brands from the stores and non-processed essentials. Close to 1 in 5 Americans (19 percent) say they’ve borrowed more money as a result of inflation in the last six months.

” Checking your recent spending for places to cut back and applying any extra funds to debt repayment or savings could be very beneficial. ” Sara Rathner , NerdWallet credit cards expert

The burden of debt is making Americans feel anxious, overwhelmed

In the last year, nearly 3 in 10 Americans (28%) declare that their overall debt has increased. 14% of Americans have taken on medical debt in this time. And this debt is likely taking its toll.

According to the study that 41 percent of Americans who have debt are worried about it, while 35% of them feel overwhelmed. This feeling of being overwhelmed is more common for Americans with annual household incomes less than $75,000 and who have debt 44% of the population feel this way, against 27% of the indebted Americans with households earning $75,000 per year or more.

BNPL could be hiding additional debt

Our annual household debt analysis examines the traditional types of debt like mortgages, credit cards and student loans. The data on these loans is compiled and published by government entities such as that of the Federal Reserve Bank of New York. But the debt problem may get worse due to the increasing number of short-term loans offered by companies like Affirm as well as Klarna. BNPL services allow you to purchase something right now and make payments in installments — often 25 percent at the time of purchase and 25% every two weeks until the loan is paid off. The longer-term BNPL options typically charge interest, like an installment loan.

According to our survey, nearly 1 in 5 Americans (18%) have used the BNPL service in the last twelve months. The situation is even more common among younger Americans: 25% from Gen Zers (ages between 18 and 25) and 30% of young adults (ages between 26 and 41) have utilized these services within the last year, compared with 16% among Gen Xers (ages 42-57) and 7 percent of baby boomers (ages between 58 and 76).

Some Americans rely heavily on BNPL service to purchase the necessities of life such as things that get used up before they’re even paid for. According to a report from September 2022 from the CFPB or CFPB the use of BNPL services for daily or necessary purchases such as utility bills, gas and groceries — was up 434% from 2020 to 2021, and up 1,207% between 2019 and 2020.

BNPL services typically come with no interest however, they can charge late fees to people who fail to pay. The CFPB report found that 10.5 percent of BNPL clients were subject to at least one late fee in 2021. While late fees are generally to be small about $7 for an typical loan total of $135- the report highlights possible downsides of the services, which could be financially harmful, such as overextending or taking on more loans than you are able to handle.

For those who only use occasionally BNPL, overextension probably won’t be an issue. However, for those who stack loans — taking multiple loans in a short period of time, and who are regular BNPL users the obligations to pay for these loans can affect their ability to pay for other expenses promptly due to the amount of BNPL obligations they are to make. This can lead to penalties for late payments, interest charges and even the loss of credit scores.

Many Americans bring financial worries to the beginning of the year

The last year was costly, and a lot of people aren’t optimistic things will improve over the next year. Nearly 7 in 10 Americans (69%) have financial concerns about the next 12 months, with a top concern being having to go into more debt to meet the needs (31%).

Over one quarter of Americans (27%) are worried about the possibility of paying higher rates of interest on their debt in this next year; this comes after a series of rate increases by the Federal Reserve and the possibility of additional rate increases in 2023.

Interest rates for credit cards are rising and could go higher

These actions by the Fed have raised the average interest rate for accounts that pay interest to 18.43 percent in August 2022, according to the Federal Reserve Bank of St. Louis. It is now the most amount since St. Louis Fed began tracking this data in 1994. For American households carrying an average of credit card debt revolving, that would produce $1,380 in annual interest charges. In the past year, the average annual interest charges of $1,029 due to lower revolving credit card debt and lower interest rates.

During the year 2022 Americans experienced seven rates increase from the Fed, and more could be coming in 2023. According to the survey that more than 3 out of 5 Americans (61 percent) think that the upcoming rate increases will impact their financial position, positive or negative. However, while 33 percent of Americans believe they’ll be able to make their existing debt more expensive and 28% think that it will make any new debt they take on more costly, one of 5 Americans (20 percent) believe they’ll gain more interest on their savings.

What do Americans can do?

Make preparations for a possible recession. At present, a recession hasn’t been declared officially, however certain experts believe that we’re in one or is coming soon. Even if you know the coming recession is imminent it’s hard to know what to expect since the consequences of a recession aren’t uniform nor universal, and the uncertainty could quickly escalate into calamity. The past few years have offered numerous evidences of the importance of being prepared for the unforeseeable and there are strategies to minimize the damage on your financial health.

If you’re in a position do so, add money to your savings regularly. This could mean continuing to build an emergency fund that covers up to three months of expenses, or perhaps investing more for the eventuality of a longer-term income loss. To make more money to put toward savings review your budget and see the areas you can reduce. It’s not necessary to cut down on your spending forever, but in the short-term it will help you boost your savings quicker.

“If you think that a couple of months worth of expenses are too much to be able to set aside right now, aim at a few hundred dollars from an account for emergency funds,” NerdWallet’s Rathner suggests. “It can be extremely useful when faced with an unexpected cost.”

” It’s impossible to influence the global economy however, you can take even small steps to feel financially secure right now. ” Sara Rathner , NerdWallet expert on credit cards

Pay now rather than later, if it is possible to. Utilizing a buy now pay later option might be the right choice for you however, before you decide to use one, look at other options. If you have enough funds to pay off the balance, putting the amount on a credit card will earn rewards and also protect your purchase in the event of a return or defective product. It can also be beneficial to save up for any unnecessary items over 6 weeks — which is the normal BNPL timeframe — before making the purchase. You may find you no longer care to buy the item after a certain amount of time has been passed.

If you decide to utilize BNPL services, set automatic payments in order to avoid late fees and limit the amount of purchases you can make in a a short period of time to avoid becoming overwhelmed.

Avoid large financial transactions If you can, avoid major financial moves. With consumer concerns about higher interest rates, credit being harder to obtain, and a decrease in credits, it is possible that you might be advised to delay accepting new debts if you can. This might not be feasible for you, and that’s fine; sometimes, we just can’t wait for the right moment especially when we’re in financial difficulties. If you’re able to hold off making big financial changes and make major financial decisions, it’s probably a great decision to hold off.

“This is a good time to review basic financial matters,” Rathner says. “Checking your spending habits for areas where you can cut back and applying any extra funds for savings or debt repayment could be very beneficial.”

Understand how higher interest rates impact you. Over a fifth of Americans (21 percent) don’t know if the next interest rate increases will have an impact on their finances, according to the poll. However, if you’re a homeowner with high-interest loans that are variable, such as credit cards or the home equity line of credit — or have money in savings accounts, the higher rates could affect your finances. This is also true for credit with fixed rates like the mortgage or auto loan.

Increases in interest rates can make your debt more expensive however they can also make your savings grow more quickly. If you are in debt with a variable rate you should make higher or more frequent payments to repay it more quickly. Hold off on applying for big loans that have fixed rates in the event that you are able to -high rates can make large purchases, such as a home or vehicle, a lot more expensive. If you have an account for savings, make sure you check your interest rate. Rates have been incredibly low up to a point, but nowadays, you can find Annual percentage rate, also known as APRs, of 3% or higher.

“The possibility of economic uncertainty is always frightening,” Rathner says. “You cannot control the economy at large, but you can take the smallest steps to feel financially secure today.”

Methodology

This poll was conducted online within The United States by The Harris Poll on behalf of NerdWallet between October. 25-27, 2022 with 2 041 U.S. adults 18 and older. The precision of sampling of Harris survey results is measured by using a Bayesian credible interval. For this study, the sample data is precise to +/- 2.8 percentage points using 95% confidence levels. For more information on the survey’s methodology, including weighting variables and size of the subgroups, please contact Lauren Nash at .

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

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

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

From the Board of Governors of the Federal Reserve System.

, September 2022, from September 2022, from the U.S. Bureau of Labor Statistics.

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

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

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

Expand for footnotes

1. The credit card that is revolving analyzed differently than other household debt. The Federal Reserve Bank of New York uses data from Equifax, one of the three major credit reporting agencies in the U.S., as the source of its credit card debt data and also includes revolving balances (debt transferred from month to month) and transacting balances (debt that is due to be paid off on the next statement). The past few years, we’ve used data provided by the credit reporting bureau Experian to calculate the percentage of balances that were revolving and transacted on bank credit cards. Experian did not provide information for 2022 therefore we utilized the median of percentages from 2017 to 2021. Data about revolving balances on retail credit cards was not available thus we assumed the cardholders revolved their debts on credit cards as well as bank credit cards at the same time. Then, we multiplied the total outstanding balances on credit cards across the U.S. — $1.05 trillion as of September 2022 by the proportion of debt that is revolving. (According reports from the New York Fed, the household’s debt on credit cards of 925 billion in September 2022. This includes debt on credit cards for banks, but they do not include retail credit card debt. To make this figure more representative of the total cards, we rounded up the $925 billion and compared that figure to 25 percent of the reported “other” debt; the New York Fed says about one quarter of the so-called other debt is outstanding retail credit card balances.) Finally, we divided this amount by the number households that have credit card debt that is revolving. We calculated the number of houses by multiplying the number U.S. households, projected using data that were released at the end of 2021, by the percentage of households holding this debt (using estimates for 2022 based on data from the Federal Reserve’s Survey of Consumer Finances).

[2] To calculate household debt for each category — with the exclusion of revolving credit cards debt — we took the average amount for each kind of debt that was reported by the Federal Reserve Bank of New York and divided in the amount of homes that have that kind of debt. We calculated the number of household debt by multiplying total number of U.S. households, projected from data that was that were released at the end of 2021, by the percentage of households with this type of debt, based upon data taken from the 2018 Survey of Consumer Finances.

[3] Consumer price indexes, or CPIs are used to measure the changes in prices for a set of consumer goods and services. The price indexes we studied comprise prices for clothing as well as education and communications as well as food and beverages, food in the home environment, meals taken away from home, housing medical, other items and services, leisure and transportation. As per the U.S. Bureau of Labor Statistics, the price index of everything increased between 274.214 to 296.761 in the period between September 2021 and September 2022. Transportation CPI rose from 237.107 to 267.043 Food and beverages CPI increased from 280.413 to 310.635 while housing CPI rose between 283.532 to 306.323 between September 2021 and September 2022. To assess the growth in the categories of price indexes with the increase in income in 2012, we have projected the 2022 median household income using the 2021 median income of $70,784 and then increasing or decreasing it according to the quarterly percent changes reported by the Bureau of Labor Statistics’ Employment Cost Index data for civilian workers. Based on Census data the median household earnings was $70,784 in 2021 and our projections indicate a median household income of $73,653 for 2022.

[4] To determine credit card interest over the course of a year, we used our estimate of credit card debt that is revolving and information on the average rate of interest on credit card accounts that are assessed interest by the Federal Reserve Bank of St. Louis until August 2022. In the event of a constant balance we divided the average revolving credit card debt among households with outstanding credit card loans by the APR average. This is only an estimate; for simplicity our calculations do not take into account the daily compounding of balances or fluctuations in balances.

5. According to the U.S. Bureau of Labor Statistics the price index for all items was up from 231.015 to 296.761 from September of 2012 between September 2012 and September 2022. Based on Census data the median household income of $51,017 was recorded in 2012. our projections suggest the median household income to be $73,653 in 2022.

[6] As per the U.S. Bureau of Labor Statistics the price index for all items grew by 256.596 and to 296.761 during the period between September and September 2022. Transportation CPI increased by 209.896 to 267.043 Food and drink CPI rose to 258.59 to 310.635 as well as housing CPI rose by 267.555 and reached 306.323 in the period between September and September 2022. Based on census data the median household income was $68,703 in the year 2019 and our projections project a median household income of $73,653 in 2022.

About the author: Erin El Issa is a credit cards expert and writer on studies at NerdWallet. Her work has been featured by USA Today, U.S. News and MarketWatch.

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