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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 that credit card debt is growing as the cost of living increases. And many Americans are concerned about financial issues in the coming year.

By Erin El Issa Senior Writer | Personal finance, analysis of data, credit card Erin El Issa writes data-driven research on personal finance, credit cards, investment, travel, banking and student loans. She is a fan of numbers and hopes to demystify data sets to help consumers improve the quality of their lives financially. Prior to becoming an Nerd at the beginning of 2014, Erin was an accountant for tax and freelance personal financial writer. Erin’s work has been mentioned in The New York Times, CNBC, The “Today” programme, Forbes and elsewhere. In her spare moments, Erin reads voraciously and struggles to keep on top of her two kids. Her home is in Ypsilanti, Michigan.

Jan 10 Jan 10, 2023

Edited by Paul Soucy Lead Assigning Editor Credit scoring, credit cards Personal finance 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, then built his own successful freelance writing and editing business. He edited the USA Today Weekly International Edition and was awarded the most prestigious award by 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 year has been an expensive one. Living expenses is increasing faster than incomes, forcing many Americans to take on more debt to pay for their expenses. And interest rates that have increased due to inflation are making borrowing more expensive.

NerdWallet’s annual review of household debt shows that the balances on credit cards carried from month to month have increased in the last 12 months, which totaled around $460 billion as of September 2022 . Mortgages, auto loans and overall debt load have also increased in the last year, while student loan debt fell slightly.

Here’s the breakdown of what U.S. households owed in all and the median amount per household with each type of debt, as of September 2022 .

Type of debt

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

Total owed in U.S.

Percentage change of total owed between 2021 to 2022.

Any kind of debt*

$165,388

$16.51 trillion

+7.65%

Credit cards (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 as well as home equity lines of credit and auto loans and credit cards. It also includes student loans and other household debt according to the Federal Reserve Bank of New York. **Total U.S. credit card outstanding debt includes revolving and transacting balances. Revolving debt was calculated with the help of the average over the past five years of percentages of debt on credit cards that is considered to be revolving (carried month to month) as opposed to transacting (paid monthly in full). We’ve had these numbers from Experian. The credit bureau has declined to release the revolving vs. transaction data for 2022.

A note on the results for this year’s year

The 30% rise in credit card debt that is revolving (that is, balances on credit cards that are carried from month to month could be attributed to two things that have a substantial increase in total credit card debt (revolving and nonrevolving) and a higher estimated amount of revolving debt. Credit card debt total rose by 15 percent. With the cost of living exceeding increase in income It is logical that a larger portion of this increase was as a result of the revolving debt. This is merely an estimate. We calculated it using the average percentage of revolving debt over the preceding five years. This percentage 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 study analyzes government data — from such sources as those from the U.S. Bureau of Labor Statistics and the Federal Reserve Bank of New York — to examine how the debt of households is changing over the course of the year. NerdWallet has also recently conducted the online poll 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 financial position. We also inquired about Americans’ usage of “buy now buy later” services, and how your income (or not) been able to keep pace with inflation, and their financial concerns for the year to come.

Key findings

Prices are rising more quickly than incomes. In the last year, the median income of households has only increased by 4 percent, while the total cost of living increased by up to 8 . The survey found that nearly fifty percent of all employed Americans (45 percent) claim that their earnings haven’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%) say they have utilized a BNPL service in the past 12 months.

Consumers are worried about finances over the next year. Nearly 7 in 10 Americans (69 percent) are worried about their finances over the coming year. The No. concern is having to take on more debt or go into borrowing to meet the needs (31 percent) and then having to pay higher the interest they pay on their debt (27%).

The average amount of interest charged by credit cards paid by households is up due to recently announced Federal Reserve rate hikes and increasing amounts of credit card debt that is revolving. U.S. households that carry credit card debt are expected to pay an average of $1,380 in interest this year . This is assuming interest rates don’t increase.

“Credit card debt is often thought that it’s the consequence of impulsive spending, but for a lot of Americans this isn’t true,” says Sara Rathner, a NerdWallet credit cards expert. “Consumers feel the squeeze of rising prices and high interest rates, and paychecks aren’t enough to keep up. That’s forcing many to make difficult choices, such as taking out loans to cover the costs of living.”

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

Each year, we look at growth in the cost of living in comparison to the household income over the preceding decade to see if income is keeping pace with the cost of living. In the 10-year period, we have found that income growth is on the rise: Median household income has grown by 44% over the past year, while overall expenses have been up by 28% in the same span . But the situation is completely different when you consider quick-term growth because of the COVID-19 pandemic and unusually high inflation.

In analyzing the growth of the last three years- pre-pandemic to now -the median income has increased by 7 percent, however the overall cost of living has been up by almost 16 . This includes a 27% increase in transportation expenses as well as a 20% rise for food and beverage expenses, and a 14% increase in housing expenses. That could explain the reason why, as per our study, 45% of Americans believe their financial health is worse now as compared to before that COVID-19 epidemic.

In the survey, almost half of employed Americans (45%) say their pay hasn’t increased enough over the past 12 months to keep pace with inflation. Consumer price index as well as income growth data back this up. Over the past year the prices have risen — 8.2 percent annual inflation at the time of September 2022. This includes a 13% increase in transportation expenses, 11% in drinks and food costs, and 8% in housing costs. Meanwhile, median household income has grown by 4% in this time .

Consumers are doing all they can to fight rising prices. According to the survey almost 4 out of five Americans (79 percent) claim to have implemented measures to combat price increases over the last six months: 42 percent of Americans say they’ve driven less, and 39% say they’ve bought more store brands and unprocessed staples. Nearly one in five Americans (19%) say they’ve added more debt due to the rise in inflation over the last six months.

” Checking your recent spending to see where you can cut down and applying any extra funds to savings or debt repayment could be extremely beneficial. ” Sara Rathner , NerdWallet credit cards expert

Debt making Americans feel overwhelmed, anxious and stressed

Over the past year, nearly 3 in 10 Americans (28%) declare that their overall debt has increased. 14 percent of Americans saying they’ve been able to pay for medical expenses during this period. And this debt is likely taking a toll.

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

BNPL could be hiding additional debt

Our annual analysis of household debt analyzes traditional types of debt like mortgages, credit cards as well as student loans. Robust data about such loans is compiled and published by government entities like The Federal Reserve Bank of New York. But the debt problem may get worse due to the emergence of short-term loans offered by companies such as Affirm or Klarna. BNPL services let you buy something now and then make installment payments -usually 25% at the time of purchase, and then 25% every two weeks until you pay it off. Longer-term BNPL options typically cost interest, just like a traditional installment loan.

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

Certain Americans rely on BNPL services to pay for the necessities of life — things that are used up before they’re even paid for. According to a report from September 2022 by the , or CFPB, usage for everyday or necessity purchases such as gasoline, food and utilities — was up 434 percent in the period between 2021 and 2020, and up 1,207% between 2019 and 2020.

BNPL services typically come with no interest However, they could charge late fees to people who fail to pay. The CFPB report found that 10.5% of BNPL clients were subject to at minimum one late fee in 2021. Although late fees tend to be low at around $7 on an annual average loan balance of $135 -The report outlines the potential negatives of these types of services that could turn financially unhealthy, like overextension, as well as accepting more loans than you can reasonably be able to.

For those who only use BNPL once in a while, overextension probably won’t be an issue. For those who pile loans by taking on multiple loans in a short amount of time — and are regular BNPL users this payment obligation can affect their ability to pay for other expenses on time because of the amount of BNPL obligations they are to pay. This can lead to penalties for late payments, interest charges and even damage to credit scores.

Many Americans bringing financial anxiety to the beginning of the year

The last year has been expensiveand many aren’t optimistic things will improve in the coming year. Nearly 7 in 10 Americans (69 percent) are concerned about financial issues in the next 12 months The top concern being the need to enter debt, or even deeper into debt to meet the needs (31 percent).

More than one quarter of Americans (27 percent) are worried about having to pay higher rates of interest on their debt in the coming 12 months; this follows a string of rate hikes from the Federal Reserve and the possibility of further increases in 2023.

Interest rates for credit cards are increasing and could be higher.

This action by the Federal Reserve has pushed the average interest rate on accounts that incur interest to 18.43 percent in August 2022, according to the Federal Reserve Bank of St. Louis. The highest rate since the St. Louis Fed began monitoring this data in 1994. For American households with their average credit card debt revolving, that would produce an annual interest charge of $1,380. Last year, average annual interest costs were $1,029 because of lower credit card debt that is revolving and lower interest rates.

In 2022 Americans were treated to seven interest rate increases from the Fed and more are likely to be expected in 2023. According to the study, more than 3 in 5 Americans (61 percent) think that the upcoming rate hikes will impact their financial position, positive or negative. Although 33% of Americans think they’ll be able to make their existing debt more costly, and 28% believe it will make new loans more expensive, 1 in 5 Americans (20 percent) believe that they will gain more interest on their savings.

What do Americans can do?

Take steps to prepare for a possible recession. At present, a recession hasn’t been declared officially, however some experts suggest that we’re already in one or is coming soon. Even if you know one is coming, though, it can be impossible to predict what’s to come because the effects of a recession aren’t common nor universal. Moreover, the uncertainty could quickly escalate into calamity. These past few years have offered plenty of evidence about the necessity of planning for the unexpected, and there are ways to minimize the damage to your financial health.

If you’re able to make the necessary changes, you can add money to your savings routinely. It could be necessary to create an emergency fund that covers 3 to 6 months’ worth of expenses, or perhaps saving beyond that in the event of longer-term income loss. To free up more money to put toward savings, 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 can help you boost your savings quicker.

“If a couple of months worth of expenses are too much for you to be able to set aside, try to aim at a few hundred dollars to put into an emergency savings fund,” NerdWallet’s Rathner advises. “It is extremely helpful when you’re faced with an unexpected expense.”

” You can’t control the economy at large however, you can take the smallest steps to feel financially secure right now. ” Sara Rathner , NerdWallet credit cards expert

Pay now rather than later, if it is possible to. Using a buy now, pay later program might be right for you however before you choose one, look at other options. If you have enough funds for the payment of your balance placing the purchase on a credit card will earn rewards and also protect your purchase in case that you need to return the product. It is also beneficial to save for nonessentials over the course of 6 weeks — which is the typical BNPL period and then purchase the item. It is possible that you will no longer care to buy the item once some time has expired.

If you opt to use BNPL services, you can set up automatic payments to avoid late fees . Also, limit the amount of purchases you can make in a a short period of time to avoid becoming overwhelmed.

Avoid major financial decisions, if possible. With consumer concerns about higher interest rates and credit becoming more difficult to get access to, and decreasing credit limits, you might be advised to delay taking on new credit obligations as long as you can. It might not be practical for you, but it’s okay. Sometimes, we just can’t wait for the right time particularly in times of financial difficulties. If you’re able to hold back from making any major financial changes and make major financial decisions, it’s probably a great idea to do so.

“This is a good time to focus on the basics of financial management,” Rathner says. “Checking your recent spending for areas where you can cut costs and then putting the extra money to 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 rates will have an impact on their finances, according to the survey. If you’re in the market for high-interest loans that are variable, such as credit cards or an equity loanor are in savings accounts, increasing rates will probably affect you. Same applies to new debt with fixed rates, such as an auto or mortgage loan.

Interest rate increases can make your debt more expensive however they can also help your savings grow more quickly. If you are in debt with a variable rate, aim to pay more or less frequent payments to repay it quicker. Do not apply for large loans with fixed rates too as you canthe higher rates will make major purchases, such as a house or car, vastly more costly. If you have a savings account, check your interest rate. Rates were extremely low up until recently, however today, you can get annual percentage rates, also known as APRs, of at least 3.

“The possibility of economic uncertainty is always scary,” Rathner says. “You cannot control the economic system in general but you can take even small steps to feel more 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 determined using a Bayesian reliable interval. In this study the sample data is accurate to within +/+/- 2.8 percentage points with the 95% confidence level. To learn more about the methodology of this survey that includes weighting variables and subgroup sample sizes, please contact Lauren Nash at .

NerdWallet’s analysis includes data from these sources:

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

, December 2021, 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, taken of 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. Credit card balances that are revolving analyzed differently from other types of household debt. It is the Federal Reserve Bank of New York utilizes data from Equifax, among the three major credit reporting agencies in the U.S., as the source of its credit card debt data and includes accounts with revolving balances (debt that is carried between months) as well as transacting balances (debt that is due to be paid off at the next statement). The past few years, we’ve used information from the credit bureau Experian to calculate the proportion of balances that were revolving and transacted through bank credit cards. Experian did not provide information for 2022 We therefore used the average of percentages for 2017 through 2021. Data about revolving balances on retail credit cards wasn’t available therefore we assumed that the cardholders revolved their debts on credit cards as well as bank credit cards in the same way. Then, we multiplied the total balances on credit cards across the U.S. — $1.05 trillion at the time of September 2022 — by the percentage of revolving debt. (According reports from the New York Fed, the household’s debt on credit cards of 925 billion by September 2022, which includes debt on bank credit cards but no retail credit cards. To make the number more representative of all cards, we rounded up the $925 billion and added that figure to 25 percent of reported “other” debt. The New York Fed says about one quarter of the so-called other debt is outstanding retail credit card balances.) In addition, we divided this sum by the number of households with credit card debt that is revolving. We estimated the number households by multiplying the total number U.S. households, projected based on data published at the close of 2021, and then dividing it by the percentage of households who have the debt (using 2022 estimates based on data taken from the Fed’s Survey of Consumer Finances).

2. To determine the amount of debt owed by households for each category — with the exception of revolving credit card debt, we calculated the average amount for each type of debt reported from the Federal Reserve Bank of New York and divided it by the number of households who have 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 proportion of households that have the debt, based on data from the 2019 Survey of Consumer Finances.

Consumer price indexes, also known as CPIs track changes in price for a set of consumer goods and services. The price indexes we studied comprise prices for clothing education and communication as well as food and beverages and food in the home environment, meals taken away from home, housing, medical, other products and services, leisure and transportation. As per the U.S. Bureau of Labor Statistics the price index for all goods and services increased by 274.214 to 296.761 in the period between September 2021 and September 2022. Transportation CPI rose between 237.107 to 267.043 Food and beverage CPI was up from 280.413 up to 310.635 as did housing CPI was up from 283.532 and reached 306.323 between September 2021 and September 2022. To measure the change in the categories of price indexes with income growth since 2012, we projected a median household income of $70,653 in 2022 using the 2021 median reported income of $70,784, and then increasing or decreasing it according to 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 earnings was $70,784 in 2021 and our projections indicate a median household income of $73,653 by 2022.

[4] To determine interest rates on credit cards over the time of the year, we used our estimate of credit card debt that is revolving and information about the average interest rate on credit card accounts that are assessed interest from the Federal Reserve Bank of St. Louis beginning in August 2022. With a steady balance, we multiplied the average revolving credit card debt among households with credit card debt by the average APR. This is just an estimate; for simplicity our calculations do not take into account the daily compounding of balances or fluctuations in balances.

5. Based on the U.S. Bureau of Labor Statistics the price index for all items increased from 231.015 to 296.761 between September 2012 until September 2022. Based on Census information the median household income of $51,017 was recorded in 2012; our projections show an average household income of $73,653 by 2022.

[6] According to the U.S. Bureau of Labor Statistics The price index for all items increased from 256.596 and to 296.761 during the period between September until September 2022. Transportation CPI increased to 209.896 to 267.043, food and beverage CPI increased from 258.59 to 310.635 while housing CPI was up from 267.555 up to 306.323 between September 2019 to September 2022. Based on census data the median household’s income in 2019 was $68,703 Our projections predict the median household income to be $73,653 for 2022.

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

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