Americans are facing a growing financial struggle as credit card debt continues to rise, surpassing savings for many. A recent Bankrate survey revealed that one in three Americans has more credit card debt than emergency savings, pointing to a concerning trend in personal finances.
Despite a cooling inflation and a strong job market, many individuals are finding it difficult to keep up with credit card payments. Data from the Federal Reserve Bank of New York showed that by the end of 2023, Americans collectively held over $1 trillion in credit card balances, marking a record high.
The increase in credit card and auto loan delinquencies, particularly among younger and lower-income households, suggests heightened financial stress among certain demographics, according to Wilbert van der Klaauw, an economic research advisor at the New York Fed.
A breakdown by generation revealed that Millennials and Gen Xers are more likely to have more credit card debt than emergency savings. Bankrate’s Chief Financial Analyst, Greg McBride, noted that more Americans are now focusing on simultaneously paying down debt and boosting emergency savings, rather than prioritizing one over the other, especially given the significant increase in the cost of carrying debt in recent years.
The average American household owes nearly $8,000 in credit card debt, according to data from the Federal Reserve Bank of New York and the U.S. Census Bureau. Additionally, credit card balances increased by approximately $50 billion in the fourth quarter of 2023, with credit card delinquencies also on the rise.
The overall stability of the U.S. economy is evident, but the increase in credit card debt and delinquencies highlights areas of financial overextension among consumers. Contributing factors include higher prices for essentials such as food, gas, and housing, exacerbating the issue of credit card debt.
Furthermore, a breakdown by generation revealed that Generation X has the largest credit card balances, with each demographic experiencing an increase in debt between 2021 and 2022. Finally, the combination of paying down debt and increasing emergency savings is now a priority for 36% of Americans, as indicated by the survey.