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2022 American Household Credit Card Debt Study

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2022 American Household Credit Card Debt Study

The annual NerdWallet study shows the credit card debt growing in tandem with the cost of living. Additionally, many Americans are worried about their finances for the next year.

by Erin El Issa Senior Writer | Data analysis, personal finance, credit cards Erin El Issa writes data-driven studies about personal finance, credit cards, travel, investing, banking and student loans. She is a fan of numbers and hopes to make data sets understandable to help consumers improve their finances. Before she became an Nerd in 2014, she worked as a tax accountant and freelance personal finance writer. Erin’s work has been cited as a result by The New York Times, CNBC as well as on the “Today” show, Forbes and elsewhere. In her free time, Erin reads voraciously and is unable to keep up with her two kids. Her home is in Ypsilanti, Michigan.

Jan 10 2023

Editor: 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 after which he established a successful freelance editing and writing practice. The editor of The USA Today Weekly International Edition and received the highest distinction 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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This past year has been an expensive one: Cost of living has risen more quickly than incomes, which is forcing many Americans to borrow more to pay for their expenses. In addition, interest rates that have increased in response to inflation are making borrowing more costly.

The annual report of NerdWallet’s study of household debt finds that credit card balances carried between months have been increasing over the last 12 months, which totaled around $460 billion as of September 2022 . Auto loans and total debt also increased over the past year, and student loan debt decreased slightly.

Here’s a breakdown of the amount U.S. households owed in total , and the average amount per household for each type of debt, in September 2022 .

Type of debt

Total owed by an typical U.S. household with this credit

Total owed in the U.S.

Percentage change for total owed between 2021 and 2022.

Any kind of debt*

$165,388

$16.51 trillion

+7.65%

Cards for credit (total)(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 can include mortgages and lines of credit for home equity and auto loans, credit cards, loans for students, loans and other debts of the household, according to the Federal Reserve Bank of New York. *Total U.S. credit card outstanding debt comprises transacting and revolving balances. Revolving debt was calculated with the average of the past five years of percentages of debt on credit cards that is considered to be revolving (carried month to month) in contrast to transacting (paid monthly in full). We’ve had these figures from Experian. The credit bureau refused to release the revolving vs. transaction data for 2022.

A note about this year’s data

The nearly 30% increase in revolving credit card debt (that is, balances of credit cards that are carry from month-to-month — can be attributed to two factors: a significant increase in total credit card debt (revolving and nonrevolving) and a greater amount of revolving debt. Credit card debt total rose by 15%. Since the price of living is outpacing the growth in income so it is only natural that a larger portion of that increase came in as a result of the revolving loans. This is merely an estimate. We calculated it using the average percentage of revolving debt over the preceding five years. This figure is higher than the historically low revolving credit percentage of 2021 however it is in line with percentages in the years before the COVID-19 pandemic.

Our annual study analyzes government data including such sources like the U.S. Bureau of Labor Statistics and the Federal Reserve Bank of New York — to see how the debt of households has changed over the course of the year. NerdWallet has also recently conducted to conduct an online study of over 22,000 U.S. adults, conducted by The Harris Poll, to learn more about how Americans are feeling about their debt and how they think future interest rate increases will affect their finances. We also inquired about Americans using “buy now buy later” services, and how your income (or hasn’t) kept pace with inflation, as well as their financial worries for the coming year.

The key findings

The cost of living is rising faster than incomes. In the last year, median household income has grown just 4 percent, while total cost of living has increased by 8percent . The survey revealed that nearly fifty percent of all employed Americans (45 percent) say their pay hasn’t grown enough over the last twelve months to keep up with inflation.

Buy now, pay later services may mean deeper debt for millions. One in five Americans (18 percent) claim to have used a BNPL service in the past 12 months.

Consumers are worried about financial stability over the coming year. Nearly 7 in 10 Americans (69%) are concerned about financial matters over the coming year. The No. 1 worry is having to take on more debt or go into borrowing to meet the needs (31%), followed by having to pay higher the interest they pay on their debt (27 percent).

The average amount of credit card interest paid by households is up in recent Federal Reserve rate hikes and rising amounts of credit card debt revolving. 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 go higher.

“Credit card debt is usually considered that it’s the consequence from frivolous spending, but for the majority of Americans, that’s just not true,” says Sara Rathner an NerdWallet credit card expert. “Consumers suffer the pressure of higher prices and the rising interest rates, and wages simply aren’t up to par. That’s forcing many to make difficult decisions, such as taking out loans to pay for necessities.”

Cost of living outpaces earnings growth by a significant amount over the last year

Every year, we analyze growth in the cost of living compared with that of household income in the prior decade to determine whether income is in line with expenses. In the 10-year period, we discovered that income is growing with expenses: Median household income has grown by 44% from 2012 and total expenses have grown by 28% over the same span . However, the picture is drastically different when you consider quick-term growth due to the COVID-19 pandemic and the unusually high rate of inflation.

The growth rate over the last three yearsfrom pre-pandemic up to todaythe median income has increased by 7 percent, however overall costs have grown by nearly 16 . This includes a 27% rise in transportation costs and a 20 percent increase for food and beverages expenses, and a 14% increase in housing costs. This could be a reason why, according to our survey, 45% of Americans believe their financial health is worse now compared with before that COVID-19 epidemic.

According to the survey, more than 50% of working Americans (45%) claim that their salaries haven’t grown enough over the last twelve months to keep pace with inflation. The consumer price index and income growth data backs this up. In the last year we’ve seen prices rise — 8.2% annual inflation, as of September 2022. That includes 13 percent increase in transportation costs, 11% in drinks and food costs, and 8% in the cost of housing. In contrast, the median household income has grown by 4% in this period .

Consumers are doing what they can to combat higher prices. According to the study more than 4 out of 5 Americans (79 percent) declare that they’ve taken action in response to inflation over the past six months. 42 percent of Americans say they’ve driven less, while 39% say they’ve bought more brands from the stores and non-processed items. A majority of Americans (19%) say they’ve added more debt in response to inflation over the last six months.

” Examining your current spending to see where you can cut down and then putting the extra funds to savings or debt repayment could be extremely beneficial. ” Sara Rathner , NerdWallet credit card expert

Debt is making Americans feel anxious, overwhelmed

In the last year, almost 3 in 10 Americans (28%) say their overall debt has risen, with 14% of Americans saying they’ve been able to pay for medical expenses during this time. This debt is taking its toll.

According to the study the survey found that 41 percent of Americans who currently have debt are worried about it, while 35% are overwhelmed. This feeling of feeling overwhelmed is most prevalent among Americans who earn a household income of less than $75,000 and who have debt: 44% of the population feels this way, against 27% of the indebted Americans who have an annual household income of $75,000 or more.

BNPL could be hiding additional debt

Our annual analysis of household debt examines the traditional types of debt — such as mortgages, credit cards and student loans. Comprehensive information about these loans is compiled and published by government sources like that of the Federal Reserve Bank of New York. But the debt problem may get worse due to the proliferation of short-term loans made by , such as Affirm as well as Klarna. BNPL services allow you to purchase something right now and make installment payments -usually 25% at the time of purchase and 25% every two weeks until the loan is paid off. More long-term BNPL options usually charge interest, like a traditional installment loan.

According to our study that nearly one in five Americans (18 percent) have utilized a BNPL service within the last twelve months. This situation is more prevalent among younger Americans as 25% of Generation Zers (ages 18-25) and 30% of millennials (ages between 26 and 41) have utilized these services within the last year, while 16% from Gen Xers (ages 42-57) and 7% of baby boomers (ages between 58 and 76).

A few Americans depend heavily on BNPL services to pay for the necessities of life such as things that get exhausted before they’re paid for. According to a report released in September 2022 by the , or CFPB usage of the CFPB for everyday or necessity purchases — like utility bills, gas and groceries — increased by 434% from 2020 to 2021 and increased by 1,207% between 2019 and 2020.

BNPL services are often interest-free, but they may charge late fees to those who miss payments. The CFPB report revealed that 10.5 percent of BNPL customers were assessed at least one late fee in 2021. While late fees are generally to be low — around $7 on an annual average loan amount of 135the report points out the potential negatives of these types of services that could turn financially unhealthy, like overextension as well as the taking of more loans than you can reasonably be able to.

If you’re a consumer who uses BNPL once in a while it is unlikely that overextension will cause any problems. However, for those who stack loans by taking multiple loans in a short amount of time — and who are regular BNPL users this payment obligation can affect their ability to pay other bills in time due to the quantity 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 bringing financial anxiety into the new year

The last year has been expensiveand many aren’t optimistic things will improve over the coming year. Nearly 7 in 10 Americans (69 percent) are worried about their finances in the next 12 months, with a top concern being the need to enter more debt to pay for necessities (31%).

More than 25% of Americans (27 percent) are worried about the possibility of paying higher interest rates on their debts over the coming 12 months. this comes after a series of rate increases by the Federal Reserve and the possibility of more increases in 2023.

Credit card interest rates are rising and could go higher.

This action by the Federal Reserve has increased the average credit card interest rate on accounts that incur interest to 18.43 percent as of August 2022, as per the Federal Reserve Bank of St. Louis. The highest average rate since the St. Louis Fed began keeping track of this data in the year 1994. For American households with their average revolving credit card debt, that would produce $1,380 annually in interest charges. In the past year, the average annual interest costs were $1,029 due to lower credit card debt revolving, and lower interest rates.

In the year 2022 Americans were treated to seven interest rate increase from the Fed and more are likely to be coming in 2023. According to the survey that more than 3 out of five Americans (61 percent) think future rate increases will impact their finances, whether for good or for ill. While 30 percent of Americans think it will make their current debt more costly, and 28% believe it will make new debt they take on more expensive, 1 of 5 Americans (20 percent) think they’ll get more interest from their savings.

What Americans can do?

Take steps to prepare for a possible recession. In the moment, a recession hasn’t been officially declared, but certain experts believe that we’re currently in one or is coming soon. If you do know that one is coming, though, it can be impossible to know what to expect because the effects of a recession are neither uniform nor universal. it is possible for uncertainty to quickly become catastrophe. The past few years have provided plenty of evidence about the importance of preparing for unexpected events and there are strategies to to limit the impact on your financial health.

If you’re in a position make the necessary changes, you can add money to your savings consistently. It could be necessary to build up an emergency fund of 3 to 6 months of expenses, or perhaps investing more to cover longer-term income loss. To have more funds to put toward savings take a look at your budget and see the areas you can reduce. There is no need to cut back on your spending for a lifetime In the short term it will help you beef up your savings faster.

“If you’re looking at a one or two months worth of expenses are too much for you to put aside, try to aim to put a few hundred bucks to put into an emergency savings fund” NerdWallet’s Rathner says. “It can be extremely useful when faced with unexpected expenses.”

” It’s impossible to control the global economy but you can take the smallest steps to feel financially secure today. ” Sara Rathner , NerdWallet expert on credit cards

Choose to pay now instead of later, if you can. Utilizing a buy now pay later option might be the best option for you however before you choose one, consider the alternatives. If you have the money to pay off the balance, putting the purchase on a credit card will earn rewards and also protect your purchase in the event that you need to return the item. It’s also beneficial to save up for any nonessentials over the course of six weeks — the typical BNPL period and then purchase the item. You might find that you don’t need to buy the item after a certain amount of time has passed.

If you choose to use BNPL services, you can set automated payments to avoid late charges and restrict the amount of purchases you make in a short period of time to ensure you don’t get overwhelmed.

Avoid large financial transactions If you can, avoid major financial moves. With consumer concerns about the rising cost of interest and credit becoming more difficult to obtain, and a decrease in limit on credit, you may prefer to put off taking on new debts if you can. This may not be feasible for you, but it’s okay. Sometimes, we just can’t wait for the right moment especially when we’re in financial distress. If you’re able to hold back from making any major financial changes, it’s probably a good decision to hold off.

“This is the perfect time to review financial basics,” Rathner says. “Checking your spending habits for areas to cut back and applying any additional funds to debt or savings could be very beneficial.”

Understand how higher interest rates impact you. More than a fifth of Americans (21%) aren’t sure whether future rates will affect their financial position, according to the study. However, if you’re a homeowner with variable-interest debt — like credit cards or a home equity loan — or have money in savings accounts, the higher rates will probably affect you. Same applies to new debt with fixed rates, like an auto or mortgage loan.

Rate increases could make your debt more expensive however they can also make your savings grow more quickly. If you’re in debt at a variable rate you should make more frequent or higher-quality payments to reduce it faster. Hold off on applying for big loans with fixed rates, if you can -the higher rates will make major purchases, like a home or car, significantly more costly. 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, or APRs, that are 3percent or more.

“The risk of uncertainty in the economy is always scary,” Rathner says. “You can’t manage the global economy however, you can take the smallest steps to feel financially secure now.”

Methodology

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

NerdWallet’s analysis incorporates data from the following sources:

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

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

From the Board of Governors of the Federal Reserve System.

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

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

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

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

Expand for footnotes

[1] The credit card that is revolving calculated in a different way than other household debt. In the case of credit card debt, Federal Reserve Bank of New York relies on data from Equifax among the three largest credit reporting bureaus in the U.S., as the source for its credit card debt data and includes the balances that are revolving (debt transferred from month to month) and balances that are transacted (debt that is due to be paid off at the time of the next statement). The past few years, we’ve used data from the credit bureau Experian to calculate the percentage of balances that were revolving and transacted on bank credit cards. Experian declined to provide this data for 2022 therefore we used the average of percentages from 2017 to 2021. Data about revolving balances on retail credit cards was not available, so we assumed that the cardholders revolved their debts on credit cards as well as bank credit cards in the same way. We then multiplied the total balances on credit cards in the U.S. — $1.05 trillion at the time September 2022 by the percentage of debt that is revolving. (According according to New York Fed, the household’s credit card balances of $925 billion as of September 2022. This number includes bank credit cards but not retail credit cards. To make this number more representative of the total creditors, we rounded up the $925 billion, and then added that figure to 25 percent of the reported “other” debt; the New York Fed says about 25% of this debt is outstanding retail credit card loans.) In addition, we divided this amount by the number of households that have revolving credit card debt. We estimated the number houses by multiplying the number of U.S. households, projected based on data published at the close of 2021, and then dividing it by the proportion of households that have the debt (using estimates for 2022 based on 2019 data taken from the Fed’s Survey of Consumer Finances).

2. To determine household debt for each category (with the exclusion of revolving credit card debt, we calculated the average amount of each type of debt reported from the Federal Reserve Bank of New York and divided in the amount of homes with the same type of debt. We estimated the number of household debt by multiplying total number U.S. households, projected from data that was released at the end of 2021, and then dividing it by the percentage of households holding this type of debt, based upon the data that were collected from the Survey of Consumer Finances.

[3] Consumer price indexes, or CPIs are used to measure changes in price for various consumer products and services. The price indexes we studied include the cost of clothing as well as education and communications food and beverages, food at home, food away from home, housing medical, other items and services, recreation and transportation. According to the U.S. Bureau of Labor Statistics the price index for everything increased between 274.214 up to 296.761 in the period between September 2021 and September 2022. Transportation CPI was up by 237.107 to 267.043 Food and beverages CPI increased between 280.413 and reached 310.635 as did housing CPI was up between 283.532 up to 306.323 between September 2021 and September 2022. To compare the increase in the categories of price indexes and the growth in income in 2012, we have projected a 2022 median household income using the 2021 median income of $70,784, and then increasing or decreasing it according to the percentage changes that occur quarterly within 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 show an average household income of $73,653 in 2022.

4] To estimate interest on credit cards over the course of a year, we applied our estimation of credit card debt that is revolving and data on the average interest rate on credit card accounts that are assessed interest by the Federal Reserve Bank of St. Louis beginning in August 2022. With a steady balance, we divided the average revolving credit card debt for households with high credit card balances by their average annual percentage rate. This is only an estimate. For the sake of simplicity the calculations don’t account for any fluctuating or daily compounding balances.

5 As per the U.S. Bureau of Labor Statistics The price index for all goods increased by 231.015 and then 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 goods increased between 256.596 up to 296.761 in the months of September and September 2022. Transportation CPI increased to 209.896 to 267.043 Food and drink CPI rose to 258.59 up to 310.635 and housing CPI was up from 267.555 to 306.323 between September 2019 and September 2022. Based on census data the median household income was $68,703 in the year 2019; our projections show an average household income of $73,653 by 2022.

The author’s bio: Erin El Issa is an expert in credit cards and a writer for studies at NerdWallet. The work she has written for NerdWallet was highlighted by USA Today, U.S. News and MarketWatch.

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