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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 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.
By Erin El Issa Senior Writer | Personal finance, data analysis credit cards Erin El Issa writes data-driven studies on personal finance, credit cards, investment, travel, banking as well as student loans. She loves numbers and aims to simplify data sets in order to assist consumers in improving their finances. Before becoming a Nerd during 2014, Erin worked as an accountant for tax purposes and freelance personal financial 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 up with her two kids. She is based in Ypsilanti, Michigan.
Published Jan 10, 2023 9:16 AM PST
Written by Paul Soucy Lead Assigning Editor Credit cards, credit scoring personal financial planning Paul Soucy has led the Credit Cards content team at NerdWallet since 2015. He worked as an editor at USA Today, The Des Moines Register and the Meredith/Better Homes and Gardens family of magazines for more than 20 years. He also established a profitable freelance writing and editing practice that focuses on personal and business finance. He was editor of USA Today Weekly International Edition for six years and won the highest distinction of the year from ACES: The Society for Editing. He holds a bachelor's degree in journalism, as well as a Master of Business Administration. The family lives in Des Moines, Iowa, with his fiancée, his two sons, and an animal named Sam.
The majority or all of the products we feature are from our partners, who pay us. This influences which products we feature and where and how the product is featured on a page. However, this does not influence our evaluations. Our opinions are our own. Here's a list and .
The past year has been a very expensive one. Cost of living is rising faster than incomes, forcing many Americans to take on more debt to make ends meet. In addition, interest rates that have increased in response to inflation are making debt more expensive.
NerdWallet's annual review of the debt burden of households shows that the balances on credit cards carried from month to month have increased in the past twelve months, reaching approximately $488 billion as of 2022 . Auto loans as well as student loans and overall debt loads also increased over the course of the year.
Here's a breakdown of what U.S. households owed in total and the average amount per household with all types of debt at the time of December 20, 2022:
Kind of debt
Total amount owed by a typical U.S. household with this credit
Total owed in U.S.
Percentage change of total owed between 2021 and 2022.
Any kind of debt*
$169,242
$16.9 trillion
+7.83%
Credit cards (total)*
$18,054
$1.11 trillion
+15.25%
Credit cards (revolving)
$7,919
$488.12 billion
+32.64%***
Mortgages
$227,188
$11.92 trillion
+8.33%
Auto loans
$29,251
$1.55 trillion
+6.06%
Student loans
$59,149
$1.6 trillion
+1.19%
* This debt could include mortgages and mortgages, home equity line of credit, auto loans credit cards, loans for students, loans and other household debt, 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 using the average of the previous five years of percentage that credit card debt is that is considered as revolving (carried from month to month) as opposed to transacting (paid in full every month). The past few years, we've had these numbers from Experian. The credit bureau declined to give the revolving and. transactions data for 2022.
An update on the data for this year
The 32% rise in credit card debt that is revolving which is balances on credit cards that are carried from month to month could be attributed to two things: a significant increase in total credit card debt (revolving and nonrevolving) and a higher estimated amount of the revolving debt. Credit card debt total rose by 15 percent. With the cost of living outpacing income growth so it is only natural that a greater share of the increase was through credit card debt that is revolving. This is merely an estimate. We calculated it using the average percentage of revolving debt from the last five years. This figure is higher over the previously lower revolving credit percentage of 2021 however it is similar to percentages from prior years prior to the COVID-19 pandemic.
The annual study we conduct analyses government data -- from 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 has changed over the last year. NerdWallet also recently commissioned the online poll of more than 2,000 U.S. adults, conducted by The Harris Poll, to learn more about the way Americans are feeling about their debt, and how they think future interest rate increases will affect their financial situation. We also inquired about Americans' usage of "buy now buy later" services, and how their income has (or hasn't) kept pace with inflation, and their financial concerns for the year to come.
Key results
The cost of living is rising faster than incomes. In the past year, the median household income has grown just 4% however, the total price of living increased by 8 . The survey found that nearly fifty percent of all employed Americans (45%) claim that their earnings haven't increased enough over the past twelve months to keep pace with inflation.
Buy now, pay later services may mean deeper debt for millions. One in five Americans (18 percent) said they've employed a BNPL service in the past 12 months.
Consumers are anxious about finances in the coming year. Seven in 10 Americans (69%) have concerns regarding their finances for the coming year. The number. 1 worry is having to borrow more or take on borrowing to meet the needs (31 percent) and then having to pay more interest on their debt (27%).
The average amount of interest on credit cards that households pay has increased due to the recent Federal Reserve rate hikes and the increasing amount of credit card debt revolving. U.S. households that carry credit card debt are expected to pay an average of $1,380 the interest rate this year . And that's assuming interest rates don't rise.
"Credit card debt is usually considered to be the result from frivolous spending, but for the majority of Americans this isn't true," says Sara Rathner who is a credit card NerdWallet expert. "Consumers feel the pinch of higher prices and interest rates, and paychecks just aren't keeping up. Many are forced to make difficult choices, such as going into debt to fund essentials."
Cost of living outpaces earnings growth by a significant amount over the last year
Every year, we examine the increase in the cost of living as compared to the household income over the prior decade to see if income is keeping pace with expenses. If we use the 10-year time frame, we have found that income is growing: Median household income is up by 44% from 2012, while the overall cost of living has increased by 28% in the same span . However, the picture is drastically different when you consider quick-term growth due to the COVID-19 virus and the unusually high inflation.
The growth rate over the last three years -from pre-pandemic up to todaythe median income has risen by 7%, but the overall cost of living has increased by nearly 16 . This includes a rise of 27% in transportation costs as well as a 20% rise for food and beverages expenses, and a 14% increase in housing costs. And that may partly explain the reason why, as per our study, 45% of Americans say their overall financial situation is getting worse as compared to before that COVID-19 epidemic.
In the survey, nearly 50% of working Americans (45 percent) believe that their wages haven't been increasing enough in the last twelve months to keep pace with inflation. In the consumer price index and income growth data backs this assertion. Over the past year, we've seen prices soar up to 8.2 per cent annual inflation at the time of September 2022. It includes an increase of 13 percent increase in transportation expenses, 11% in drinks and food costs, and 8% increase in the cost of housing. Meanwhile, the median household income has increased by 4% in this time .
Consumers are doing what they can to fight rising prices. According to the study more than 4 out of 5 Americans (79 percent) declare that they've implemented measures to combat rising prices over the past six months. 42% of Americans say they've driven less, while 39% say they've bought more brands from the stores and non-processed items. Nearly one in five Americans (19%) have taken on more debt as a result of inflation in the past six months.
" Examining your current spending for places to cut back and then putting the extra funds to debt repayment or savings can be a big help. " Sara Rathner , NerdWallet expert on credit cards
Debt making Americans feel stressed, anxious and overwhelmed.
Over the last year, more than 3 out of 10 Americans (28%) declare that their debt has increased. 14% of Americans have taken on medical debt in this time. It's likely that this debt is having a negative impact on their lives.
According to the study the survey found that 41% of Americans who are currently in debt are stressed about it and 35% are overwhelmed. This feeling of being overwhelmed is more common among Americans who earn a household income of less than $75,000 and who have debt 44% of this group feel this way, in contrast to 27% of the indebted Americans who have annual household incomes of $75,000 or more.
BNPL could be hiding other debt
Our annual analysis of household debt looks at traditional debt types including mortgages, credit cards, and student loans. The data on these debts is compiled and reported by government sources 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 and Klarna. BNPL services allow you to purchase something today and pay back in installmentsusually 25% at the time of purchase and 25% each two weeks until you pay it off. Longer-term BNPL options usually charge interest, like an typical installment loan.
Based on our study that nearly one in five Americans (18%) have utilized the BNPL service within the last twelve months. The situation is even more prevalent for younger Americans: 25% of Generation Zers (ages 18 to 25) and 30% of young adults (ages between 26 and 41) have utilized these services within the past year, while 16% among Gen Xers (ages 42-57) and 7% from baby boomers (ages 58-76).
A few Americans depend heavily on BNPL services to pay for everyday necessities items that are consumed before they're paid for. According to a report released in September 2022 by the CFPB, or CFPB the use of BNPL services for daily or necessary purchases -- like utility bills, gas and groceries -- was up 434% from 2020 to 2021 and increasing by 1,207% between the years 2019 and 2020.
BNPL services are often interest-free However, they could be charged late fees for those who miss payments. The CFPB report revealed that 10.5 percent of BNPL clients were charged at minimum one late fee in 2021. And while late fees tend to be small about $7 on the annual average loan balance of $135 -- the report highlights possible disadvantages of these services which could become financially unhealthy such as overextension or taking on more loans than you can reasonably handle.
For those who only use the BNPL every now and then the possibility of overextension shouldn't be a problem. However, for those who stack loans and take on several loans in a short period of time and are regular BNPL users, these payment obligations can affect your ability to make their other bills on time because of the volume of BNPL payments to make. This could lead to penalties for late payments, interest charges and even harm to credit scores.
Many Americans are bringing financial stress into the new year
The last year was expensive, and many people aren't confident that things will get better in the next year. Seven out of 10 Americans (69 percent) have financial worries about the coming year, with a top concern being having to go into more debt to meet the needs (31%).
More than one quarter of Americans (27 27.7%) are worried about having to pay higher interest on their debt over this next year; this comes after a series of rate hikes by the Federal Reserve and the possibility of additional rises in 2023.
The interest rates on credit cards are increasing and could be higher
These actions by the Fed have raised the average interest rate on accounts incurring interest to 18.43% as of August 2022, according to the Federal Reserve Bank of St. Louis. It is now the most average rate since the St. Louis Fed began keeping track of this data in the year 1994. For American households that carry an average of revolving credit card debt it would cost $1,380 in annual interest charges. Last year, average interest charges were $1,029 annually due to lower revolving credit card debt and lower interest rates.
During 2022, Americans were treated to seven interest rate increases from the Fed, and more could be coming in 2023. According to the survey over 3 in five Americans (61 percent) think future rate increases will impact their finances, whether in good or bad ways. Although 30 percent of Americans think that it will make their existing credit more expensive, and 28% believe it will make new loans more costly, one of 5 Americans (20 percent) think they'll get more interest from their savings.
What do Americans can do?
Make preparations for a recession that could be coming. At present there is no recession declared officially, however some experts suggest that we're currently in one or is coming soon. If you do know that one is coming, though it's hard to know what to expect because the effects of a recession aren't common nor universal. Moreover, the uncertainty could quickly escalate into disaster. The past several years have given plenty of evidence about the importance of preparing for the unexpected and there are strategies to minimize the damage on your financial health.
If you're able to do so, add money to your savings routinely. It could be necessary to build an emergency fund that covers three to six months' worth of expenses, or perhaps making savings higher than that for the eventuality of longer-term income loss. To make more money to put toward savings, look at your budget and determine where you can cut. There is no need to reduce your spending forever, but in the short-term, it can help you increase your savings more quickly.
"If a few months worth of expenses seems too much for you to be able to set aside right now, aim at a few hundred dollars in an emergency savings account," NerdWallet's Rathner suggests. "It can be enormously helpful when you're faced with an unexpected expense."
" It's impossible to manage the economy in general but you can take small steps to feel financially secure now. " Sara Rathner , NerdWallet credit cards expert
Pay now rather than later, if you are able to. Using a buy now, pay later service may be right for you, but before you use one, consider the alternatives. If you have enough funds for the payment of your balance putting the amount on a credit card can be rewarded and protect the purchase in case of a return or defective item. It's also a good idea to save money for non-essential items for the duration of 6 weeks, which is which is the normal BNPL timeframe -- and then make the purchase. You may find you no need to purchase the item after a certain amount of time has passed.
If you opt to utilize BNPL services, set up automatic payments to avoid late fees and limit the amount of purchases you can make in a the short timeframe to ensure you don't get overwhelmed.
Avoid big financial moves If you can, avoid major financial moves. With consumer concerns about the rising cost of interest and credit becoming more difficult to get access to, and decreasing credits, it is possible that you might prefer to put off taking on new credit obligations as long as you are able to. This may not be feasible for you, and that's OK; sometimes we can't wait for the perfect time, particularly when experiencing financial difficulties. However, if you are able to put off making big financial decisions and make major financial decisions, it's probably a great idea to do so.
"This is the ideal moment to concentrate on the basics of financial management," Rathner says. "Checking your recent spending to see where you can cut down and putting any extra money for savings or debt repayment can be extremely beneficial."
Know how interest rates will can affect your finances. Over a fifth of Americans (21%) aren't certain if future interest rate increases will affect their finances, according to the study. If you're in the market for credit with variable interest rates, like credit cards or a home equity line of credit -- or have savings accounts the higher rates could impact you. Same applies to new loans with fixed rates such as a mortgage, auto loan.
Increases in interest rates can make your debt more costly however they increase your savings faster. If you're in debt at a variable rate try to pay more or less frequent payments to reduce it faster. Avoid applying for large loans that have fixed rates too as you canhigh rates can make large purchases, such as a house or vehicle, a lot more expensive. If you have an account for savings, make sure you check the interest rate. Rates were incredibly low until just recently, but now you can find with Annual percentage rate, or APRs, of at least 3.
"The risk of uncertainty in the economy is always a source of anxiety," Rathner says. "You can't manage the economic system in general 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 to 27, 2022 with 241 U.S. adults 18 and older. The precision of sampling of Harris polls online is determined with a Bayesian credibility interval. For this study the data collected is reliable to within +/+/- 2.8 percentage points using the 95% confidence level. For more information on the survey's methodology, including weighting variables and subgroup sample sizes, get in touch with Lauren Nash at .
NerdWallet's analysis includes data from the following sources:
December 2022, as reported by the Federal Reserve Bank of New York's Center for Microeconomic Data.
, November 2022, from the U.S. Census Bureau.
from members of the Board of Governors of the Federal Reserve System.
September 2022, data from September 2022, from the U.S. Bureau of Labor Statistics.
, December 2021, from the U.S. Census Bureau.
September 2022, taken from 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 to footnotes for footnotes
1. Credit card balances that are revolving calculated in a different way from other types of household debt. The Federal Reserve Bank of New York utilizes data from Equifax, one of three major credit reporting bureaus within the U.S., as the source for its credit card debt data and includes revolving balances (debt transferred from month to month) as well as transacting balances (debt which will be paid off on the next statement). In the past, we've used data of the credit bureau Experian to calculate the percentage of balances that were revolved and transacted on bank credit cards. Experian did not provide information for 2022, therefore we used the average of percentages from 2017 to 2021. Information on revolving balances on retail credit cards wasn't provided, so we assumed that cardholders revolved debt on banks and retail credit card credit cards at the same time. Then, we multiplied total balances on credit cards across the U.S. -- $1.11 trillion as of December 20, 2022 -- and then divided it by the proportion of debt that is revolving. (According reports from the New York Fed, the household's credit card balances of $986 billion by December 2022. This includes bank credit cards , but they do not include retail credit card debt. To make this figure more representative of the total cards, we took $986 billion, and then added that figure to 25 percent of the total "other" debt. The New York Fed says about one quarter of the so-called other debt is outstanding 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 taking the number U.S. households by the proportion of households with that credit card (using the 2022 forecast based on 2019 data taken from 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 card debt -- we took the average of each type of debt that was reported to the Federal Reserve Bank of New York and then divided this amount into the total number of homes with this type of debt. We calculated the number of households by multiplying the total number U.S. households by the proportion of households with that debt, based on the data of the latest Survey of Consumer Finances.
Consumer price indexes, or CPIs, measure the changes in prices for a variety of services and goods for consumers. The price indexes that we examined comprise prices for clothing as well as education and communications, food and beverage, food from home taken away from home, housing medical, other products as well as services, recreational activities and transportation. As per the U.S. Bureau of Labor Statistics, the price index for all items grew between 274.214 to 296.761 between September 2021 and September 2022. Transportation CPI increased by 237.107 to 267.043 food and drink CPI increased from 280.413 up to 310.635 as did housing CPI rose by 283.532 up to 306.323 between September 2021 and September 20, 2022. To measure the change in the price index categories with income growth from 2012, we forecast the 2022 median household income by using the 2021 median income of $70,784, then increasing or decreasing it according to the changes in quarterly percentages reported within the Bureau of Labor Statistics' Employment Cost Index data for civilians. Based on census data, the median household income was $70,784 in 2021, and our projections show the median household income to be $73,653 in 2022.
4. To calculate credit card interest over the course of a year We calculated the credit card debt that is revolving as well as information about the average interest rate for credit card accounts that have been assessed interest from the Federal Reserve Bank of St. Louis beginning in August 2022. In the event of a constant balance we multiplied the average revolving credit card debt of households with outstanding credit card loans by the APR average. This is merely an estimate; for simplicity, our calculations don't consider daily compounding or fluctuating balances.
5 Based on the U.S. Bureau of Labor Statistics, the price index of all items grew from 231.015 to 296.761 between September 2012 between September 2012 and September 2022. Based on Census information, the median household income was $51,017 in 2012. our projections show a median household income of $73,653 for 2022.
6. Based on the U.S. Bureau of Labor Statistics The price index of all items increased between 256.596 up to 296.761 during the period between September to September 2022. Transportation CPI was up by 209.896 to 267.043 Food and beverage CPI rose to 258.59 to 310.635 as well as housing CPI increased from 267.555 and reached 306.323 from September of 2019 between September 2019 and September 2022. Based on Census data the median household income was $68,703 in the year 2019; our projections show a median household income of $73,653 in 2022.
About the author: Erin El Issa is an expert in credit cards and studies writer at NerdWallet. Her work has been highlighted on USA Today, U.S. News and MarketWatch.
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