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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 credit card debt surging with the cost of living. Additionally, many Americans are worried about their finances for the year to come.

by Erin El Issa Senior Writer | Data analysis, personal finance credit card Erin El Issa writes data-driven studies about personal financial matters, credit cards, investment, travel, banking as well as student loans. She is fascinated by numbers and strives to simplify data sets in order to help people improve the quality of their lives financially. Before becoming a Nerd at the beginning of 2014, Erin worked as an accountant for tax 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 spare time, Erin reads voraciously and tries in vain to keep on top of her two kids. Her home is in Ypsilanti, Michigan.

Jan 10 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 editor at The Des Moines Register, USA Today and Meredith/Better Homes and Gardens for more than 20 years. He after which he established an established freelance writing and editing business. Editorial duties included 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 and a Master of Business Administration.

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This year has been a costly one: The cost of living is increasing more quickly than incomes, which is 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 costly.

NerdWallet’s annual look at household debt finds that credit card balances carried from month to month increased over the past 12 months, totaling around $460 billion by September 2022 . Auto loans and total debt also increased over the course of the year, while student loan debt fell somewhat.

Here’s a breakdown of what U.S. households owed in all and the median amount per household for all types of debt as of September 2022 .

The type of debt

The amount of debt owed by the typical U.S. household with this 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%

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 can include mortgages and lines of credit for home equity 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 with the average of the previous five years of percentages of credit card debt deemed to be revolving (carried month to month) in contrast to transacting (paid in full every month). The past few years, we’ve had these numbers from Experian. The credit bureau has declined to release the revolving vs. transaction data for 2022.

A note about the data for this year

The 30% rise in revolving credit card debt (that is, credit card balances that are carried from month to month — can be attributed to two reasons: a significant increase in the total amount of credit card debt (revolving or nonrevolving) and a higher estimated percentage of revolving debt. Credit card debt total rose by 15%. With the cost of living outpacing increase in income, it stands to reason that a greater share of that increase came in the form of revolving credit. This is only an estimate. We have calculated it using the average percentage of revolving loans from the preceding five years. This is more over the historically lower revolving debt percentage of 2021 however it is comparable to the proportions prior to the COVID-19 epidemic.

Our annual report examines data from the government including such sources like the U.S. Bureau of Labor Statistics and the Federal Reserve Bank of New York — to examine how the debt of households changes over the past year. NerdWallet has also recently conducted an online survey of over 2,000 U.S. adults, conducted by The Harris Poll, to learn more about how Americans feel about their debt, and what they expect to happen in the future when interest rate increases will affect their financial position. We also asked about Americans who use “buy now, and pay over time” services, and how their income has (or not) kept pace with inflation, and their financial worries for the coming year.

Key findings

Prices are rising more quickly than incomes. In the past year, median household income has risen just 4 percent, while the total cost of living jumped up to 8 . The survey found that nearly fifty percent of all employed Americans (45%) claim that their earnings haven’t grown enough over the last 12 months to keep up with inflation.

Buy now, pay later services may mean deeper debt for millions. Close to 1 in 5 Americans (18%) claim to have used a BNPL service within the last 12 months.

Consumers are worried about financial stability over the coming year. Nearly 7 in 10 Americans (69 percent) are concerned about financial matters over the next 12 months. The No. top concern is the need to borrow more or take on debt to cover necessities (31%), followed by paying higher rates of interest on debt (27%).

The average amount of credit card interest paid by households is up because of the recent Federal Reserve rate hikes and rising amounts of credit card debt revolving. U.S. households that carry credit card debt will be paying an average of $1,380 in annual interest . And that’s assuming interest rates don’t go higher.

“Credit credit card debt is typically considered that it’s the consequence from frivolous expenditure, however for many Americans, that’s just not the case,” says Sara Rathner who is a credit card NerdWallet expert. “Consumers feel the squeeze of increased prices and rates of interest, and their paychecks simply aren’t up to par. This is forcing many to take difficult choices, such as borrowing to pay for necessities.”

The cost of living exceeds the growth in income significantly over the past year

Each year, we look at growth in the cost of living compared with that of household income in the prior decade to determine whether income is keeping up with the cost of living. In the 10-year period, we discovered that income is keeping up: Median household income is up by 44% since 2012 however, total expenses have increased by 28% in the same time frame . But the story changes radically when you look at short-term growth, because of the COVID-19 pandemic and unusually high inflation.

Looking at growth over the past three years- pre-pandemic to now — median income has grown by 7%, but overall expenses have increased by nearly 16percent . This includes a 27% increase in the cost of transportation, a 20% increase for food and beverages expenses, and a 14% increase in housing costs. And that may partly explain the reason, according to our study, 45% of Americans think their overall financial health is worse now as compared to before the COVID-19 pandemic.

According to the survey, more than fifty percent of all employed Americans (45 percent) believe that their wages haven’t increased enough over the past twelve months to keep pace with the rate of inflation. Consumer price index and data on income growth back this up. Over the past year we’ve seen prices rise up to 8.2 percent annual inflation at the time of September 2022. That includes 13% increase in transportation expenses and the cost of food and beverages and 8% in the cost of housing. In contrast, the households’ median income has risen by 4% in this time .

Consumers are doing what they can to reduce the impact of higher prices. According to the study, nearly 4 in five Americans (79 percent) declare that they’ve taken action in response to price increases over the last six months. In the past six months, 42% of Americans say they’ve driven less, and 39% say they’ve bought more brands from the stores and non-processed essentials. A majority of Americans (19 percent) have added more debt as a result of inflation in the last six months.

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

Debt making Americans feel anxious, overwhelmed

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

According to the survey, 41 percent of Americans who have debt are anxious about it, while 35% of them feel overwhelmed. This feeling of feeling overwhelmed is more prevalent among Americans with annual household incomes less than $75,000 and who have debt 44% of the population is feeling this way, as compared with 27% of debt-laden Americans who have an annual household income 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 collected and reported by government agencies like the Federal Reserve Bank of New York. However, the problem of debt could get worse due to the proliferation of short-term loans offered by companies like Affirm or Klarna. BNPL services let you purchase something right now and make payments in installments -usually 25% at the time of purchase and 25% each two weeks until the loan is paid off. Longer-term BNPL options typically cost interest, just like the traditional installment loan.

According to our survey, nearly 1 in 5 Americans (18 percent) have utilized a BNPL service within the last twelve months. This is more common among younger Americans as 25% of Generation Zers (ages 18-25) and 30 percent of the millennials (ages 26 to 41) have used these services within the last year, as opposed to 16 percent from Gen Xers (ages 42-57) and 7% of baby boomers (ages between 58-76).

Certain Americans rely upon BNPL service to purchase daily necessities items that are consumed before they’re paid for. According to a report released in September 2022 by the , or CFPB usage of the CFPB for everyday or necessary purchases like utility bills, gas and groceries — 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 could charge late fees to customers who do not pay. The CFPB report found that 10.5% of BNPL customers were subject to at minimum one late fee in 2021. Although late fees tend to be low — around $7 on an typical loan total of $135 -The report outlines possible downsides of these types of services that could turn financially unsound, such as overextending or accepting more loans than you’re able to handle.

For those who only use BNPL once in a while, overextension probably won’t be a problem. For those who pile loans — taking on several loans in a short amount of time — and are regular BNPL users, these payment obligations can affect the ability of paying their other bills promptly due to the volume of BNPL payments to pay. This can result in penalties for late payments, interest charges and even harm to credit scores.

Many Americans bring financial worries into the new year

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

More than 25% of Americans (27 27.7%) are concerned about having to pay higher interest on their debt over the coming 12 months; this follows a string of rate hikes by the Federal Reserve and the possibility of additional rate increases in 2023.

Credit card interest rates are rising and could go higher.

The Fed’s actions have increased the average credit card interest rate on accounts incurring interest to 18.43% as of August 2022, according the Federal Reserve Bank of St. Louis. This is the highest percentage since the St. Louis Fed began monitoring this data in 1994. For American households with an average of credit card debt revolving this would result in an annual interest charge of $1,380. Last year, average interest charges were $1,029 annually due to the lower amount of credit card debt revolving, and lower interest rates.

In the year 2022 Americans were treated to seven interest rate increases from the Fed and more are likely to be expected in 2023. According to the survey, more than 3 in five Americans (61%) believe that future interest rate increases will affect their financial position, for good or for ill. Although 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 borrowing more expensive, 1 in 5 Americans (20 percent) believe that they will get more interest from their savings.

What Americans can do

Prepare yourself for a potential recession. As of now there is no recession declared officially, however certain experts believe that we’re currently in one or is coming soon. Even if you know the coming recession is imminent, it can be impossible to predict what’s to come because the effects of a recession don’t seem to be common nor universal. Moreover, uncertainty can quickly turn to disaster. These past few years have provided numerous evidences of the importance of preparing for unexpected events however, there are methods to to limit the impact on your financial wellbeing.

If you’re able to do so, you should add funds to your savings regularly. This could mean that you continue to build an emergency fund that is three to six months of expenses, or perhaps making savings higher than that in the event of an eventual income loss. To have more funds to save, look at your budget and see where you can cut. You don’t have to reduce your spending for a lifetime In the short term it will allow you to beef up your savings faster.

“If you’re looking at a one or two months’ worth of expenses is too much to be able to set aside, try to aim to put a few hundred bucks from an account for emergency funds” NerdWallet’s Rathner says. “It is extremely helpful in the event of unexpected expenses.”

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

Choose to pay now instead of later, if you can. Utilizing a buy now pay later program might be the right choice for you however before you choose one, consider the alternatives. If you have enough funds to pay off the balance, placing the purchase on a credit card can get you rewards, and also safeguard your purchase in the event that you need to return the product. It’s also beneficial to save up for any nonessentials over the course of six weeks — the typical BNPL period before making the purchase. It is possible that you will no longer care to buy the item after a certain amount of time has passed.

If you decide to utilize BNPL services, you can set up automatic payments to avoid late fees and limit the amount of purchases you make in a short period of time to ensure you don’t get overwhelmed.

Avoid big financial moves If possible, steer clear of major financial decisions. With consumer concerns about higher interest rates and credit becoming more difficult to get access to, and decreasing credits, it is possible that you might want to hold off on taking on new credit obligations as long as you can. It might not be practical for you, and it’s okay. Sometimes, it’s just not possible to wait for the right time, particularly when experiencing financial stress. If you’re able to hold back from making any major financial changes then it’s probably a good idea to do so.

“This is a great time to focus on the basics of financial management,” Rathner says. “Checking your spending habits for places to cut back and applying any extra funds to savings or debt repayment could be extremely beneficial.”

Know how interest rates will can affect your finances. More than a fifth of Americans (21 percent) aren’t sure whether future interest rate increases could affect their financial situation, as per the survey. But if you have variable-interest debt — like credit cards or the home equity loan -or you have money in a savings account, higher rates will probably affect you. The same goes for new credit with fixed rates such as an auto or mortgage loan.

Increases in interest rates can make your debt more costly, but 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 reduce it quicker. Do not apply for large loans that have fixed rates, if you can -high rates can make large purchases, such as a home or car, significantly more expensive. If you have savings accounts, you should look up your interest rate. Rates were incredibly low up until recently, however now you can find with APRs, or annual percentage rates also known as APRs of 3% or higher.

“The risk of uncertainty in the economy is always a source of anxiety,” Rathner says. “You can’t control the economic system in general but you can take even small steps to feel more financially secure right now.”

Methodology

This poll was conducted online in the United States by The Harris Poll on behalf of NerdWallet between Oct. 25-27, 2022 among 2 041 U.S. adults 18 and older. The accuracy of sampling in Harris surveys conducted online is assessed by using a Bayesian credible interval. In this study the data collected is accurate to within +/- 2.8 percentage points, using 95% confidence levels. To learn more about the methodology of this survey, including weighting variables and subgroup sample sizes, please get in touch with 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 December 2021, 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, taken 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 to include footnotes

[1] Credit card balances that are revolving analyzed differently from other types of household debt. In the case of credit card debt, Federal Reserve Bank of New York utilizes data from Equifax one of three largest credit reporting agencies within the U.S., as the source of its data on credit card debt and includes revolving balances (debt carried between months) and balances that are transacted (debt which will be paid off on the next statement). The past few years, we’ve relied on information of the credit bureau Experian to calculate the proportion of balances that were revolved and transacted on bank credit cards. Experian hasn’t provided the data for 2022 We therefore utilized the average of percentages from 2017 to 2021. Data about revolving balances on retail credit cards weren’t available thus we assumed cardholders revolved their debt on both retail credit cards and bank credit cards in the same way. Then, we multiplied total outstanding credit card balances in the U.S. — $1.05 trillion as of September 2022 by the percentage of revolving debt. (According according to New York Fed, the household’s debt on credit cards of 925 billion by September 2022, which includes credit cards for banks, but they do not include retail credit card debt. To make this number more representative of the total 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.) Finally, we divided this amount by the number households carrying revolving credit card debt. We estimated the number houses by multiplying the number U.S. households, projected based on data released at the end of 2021, by the percentage of households holding this debt (using 2022 estimates based on 2019 data of the Federal Reserve’s Survey of Consumer Finances).

2. To determine the amount of debt owed by households for each category — with the exclusion of revolving credit cards debt — we took the average of the various types of debt that are which was provided by the Federal Reserve Bank of New York and divided in the amount of homes who have that kind of debt. We calculated the number of houses by multiplying the number U.S. households, projected from data published at the close of 2021, by the proportion of households that have this type of debt, based upon the data that were collected from the Survey of Consumer Finances.

[3] Consumer price indexes or CPIs track changes in price for a set of consumer products and services. The price indexes we surveyed comprise prices for clothing, education and communication food and beverages and food from home taken away from home, housing medical, other goods as well as services, recreational activities and transportation. According to the U.S. Bureau of Labor Statistics the price index for all items grew from 274.214 and then 296.761 between September 2021 between September 2021 and September 2022. Transportation CPI rose by 237.107 to 267.043, food and beverage CPI rose between 280.413 up to 310.635 while housing CPI increased from 283.532 to 306.323 between September 2021 and September 2022. To measure the change 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 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 in 2021 and our projections predict an average household income of $73,653 in 2022.

4. To calculate interest on credit cards over the time of the year, we utilized our estimation of credit card debt that is revolving as well as data on the average interest rate for credit card accounts that have been assessed interest from the Federal Reserve Bank of St. Louis until August 2022. Assuming a constant balance, we multiplied the average of revolving credit card debt of households with high credit card balances by their average annual percentage rate. This is only an estimate. To make it easier 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 items grew by 231.015 and then 296.761 between September 2012 and September 2022. Based on census information, the median household income reached $51,017 as of 2012. our projections predict an average household income of $73,653 for 2022.

6. Based on 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 was up from 209.896 to 267.043, food and beverage CPI was up by 258.59 to 310.635 and housing CPI increased from 267.555 up to 306.323 from September of 2019 between September 2019 and September 2022. Based on Census data the median household income in 2019 was $68,703; our projections show the median household income to be $73,653 by 2022.

The author’s bio: Erin El Issa is a credit card expert 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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