U.S. households continue to face budgeting challenges amid rising medical and student debt costs
SAN FRANCISCO, Dec. 10, 2018 /PRNewswire/ — According to NerdWallet’s 2018 American Household Credit Card Debt Study, U.S. consumers now have a collective $13.51 trillion in total household debt. Households that hold credit card debt carry an average revolving balance of $6,929, NerdWallet found.
Credit card debt continues to be one of the most expensive types of debt, and carrying that average balance of $6,929could cost $1,141 per year in interest alone. The amount Americans pay in interest may increase if the Federal Reserve increases the federal funds rate, which is likely to take place this month.
“With interest rates rising, many consumers are facing rapidly growing credit card balances in addition to other costs outpacing income growth, such as medical expenses and ballooning student loan debt,” says Kimberly Palmer, NerdWallet’s credit cards expert. “It’s more important than ever to try to pay off variable, high-interest debt, such as credit card debt, by paying off more than the minimum payment each month, but many consumers struggle to do so due to other demands on their income.”
Type of debt | Total owed by an average U.S. household with this debt | Total owed in the U.S. |
Any type of debt* | $135,768 | $13.51 trillion |
Credit cards (revolving)** | $6,929 | $420.22 billion |
Mortgages | $184,417 | $9.14 trillion |
Auto loans | $28,033 | $1.27 trillion |
Student loans | $47,671 | $1.44 trillion |
* This debt can include mortgages, home equity lines of credit, auto loans, credit cards, student loans and other household debt, according to the Federal Reserve Bank of New York. |
** The credit card debt figures in this chart represent revolving credit card balances that are carried from month to month rather than all credit card balances. Total U.S. credit card outstanding debt stands at $944 billion, which includes revolving and transacting balances. |
The ‘why’ behind debt in the U.S.
NerdWallet’s 2018 American Household Credit Card Debt Study analyzes data from multiple sources, including Federal Reserve Bank of New York, the Federal Reserve Bank of St. Louis, the U.S. Census Bureau and the Survey of Consumer Finances. Key findings include:
- Credit card interest costs continue to rise. U.S. households with revolving credit card debt pay an average of $1,141in interest annually. Assuming the average interest rate on credit card accounts assessed interest will increase in step with Federal Reserve rates, these interest charges could grow to $1,158 the next time the Fed increases rates a quarter of a percentage point, which could happen Dec. 19, 2018.
- Student loan forbearance is adding massive amounts of student debt. In the third quarter of 2018, 2.6 million student loan recipients had federally managed student loans in forbearance, with an average balance of $43,538. If all student loan recipients with federally managed loans in forbearance kept their loans in forbearance for 12 months without making interest payments, they would add a collective $5.72 billion to their loan balances.
- Incomes are growing, but some costs are growing faster. Since 2008, U.S. median income has increased 22%, while overall cost of living has increased 17%. But over the same period of time, medical costs and food away from home have increased 33% and 27%, respectively. These swiftly rising expenses could make it more challenging for many Americans to trim spending.
- Total household debt continues to grow over pre-recession levels. Total household debt, now $13.51 trillion, has continued to grow well past the $12.37 trillion owed at the start of the Great Recession in December 2007.
Debt resources
- NerdWallet’s 2018 American Household Credit Card Debt Study
- NerdWallet’s Debt Guide
- NerdWallet Free Credit Score
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Contact
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SOURCE NerdWallet