It seems so for some people because, according to a recent CreditCards.com poll, Americans are carrying their credit card debt with them long-term. Worse, 50% of people surveyed weren’t all that stressed about it.
In debt for the long haul
Out of the 1,775 adults with credit card debt surveyed, 56% have had theirs for at least a year. Of those, 37% have been in debt at least two years, 23% have kept their debt around for three years, and a startling 14% have stayed in credit card debt for at least five years. Oh, and 7% can’t remember how long they’ve been in debt, so who knows where they fall?
How can you be so blasé about debt that you’re not sure how long you’ve had it? It’s only if it’s become such a way of life that it simply isn’t noteworthy anymore. Or a perhaps even scarier idea: It was never significant enough to notice when it started.
And yes, that’s only 7% of the respondents with credit card debt, but that’s still about 124 people who aren’t sure how long they’ve been in debt. Not to mention the additional 248 people who have been indebted for at least five years, which is a heck of a long time.
Where’s the money going?
Unsurprisingly, lower income earners were more likely to carry debt: 66% of people earning under $30,000 a year had credit card balances versus 53% of $80,000+ incomes. But can we just stop and gawk at the fact that 53% of people earning $80,000 a year are carrying credit card debt? That’s an awfully high number, especially since 63% of all respondents reported that their debt was from necessary spending.
Now there are legitimate reasons that someone could need to charge everyday expenses despite a high salary. For example, medical bills could eat up a lot of money. (Ask me how I know.) But the average person is pretty healthy, so what gives?
Well, perhaps they bought too much house, and the mortgage now strains the budget so that there’s simply no extra room for unexpected or irregular expenses. Insurance deductible? Card. Car trouble? Card. Large utility bill? Card.
Or perhaps student loans are eating into a chunk of their pay. Though if they’re earning almost (or more than) $7,000 a month, you’d think they could handle even a large student loan payment without the need for credit card debt.
Or — and this is my guess — maybe the respondents simply have too loose a definition of “necessary spending.” That is, maybe lifestyle inflation has taken hold so that going out with friends and fancy new gadgets… Well, those aren’t counted as necessary spending, but that stuff leaves so little room in the budget that other, more mundane expenses have to go on the card. And since the charged expenses themselves are necessary, it doesn’t seem like the debt is due to poor budgeting.
Because the fact is that the number of high income earners carrying balances is far too large for this to be simply a case of bad financial luck. There are too many of them for all of the respondents to have expensive chronic health conditions combined with high student loans. Especially given how long these people are staying in debt.
Debt is the new normal
Another worrying fact: Higher-income households are carrying their debt longer than their lower income counterparts. Seventeen percent of $80,000+ income-earners have had debt for at least five years compared to just 7% of lower income earners.
Of course the real question is how these higher income earners can be so apparently complacent as to let the debt sit for so many years. Sure, some of them are probably hell-bent on paying down their debts, but clearly not enough since 50% aren’t terribly stressed about their balance.
Seriously, how can that be?
The average credit card APR is 17.64% these days. That’s a heck of a lot of interest to be accruing for the cardholders not to be sweating their debt. Are they divorced from the reality of credit card interest? (It might explain why they haven’t gone and gotten a 0% APR card.) Or have they simply become so inured to the idea of owing that it’s no longer a priority to pay off the cards?
I’m betting it’s the latter. I think it’s become so mundane to have credit card debt — especially once it’s been a year or more — that it simply starts to seem like par for the course. As though that’s the way it will always be, so there’s no point in fretting, let alone working hard to pay it off.
Been there, done that, didn’t buy the t-shirt
Of course, we shouldn’t discount the half of the people from the study who are stressed out about their card debt.
Unfortunately, the article doesn’t tell us how that half broke down. I’m willing to bet that the lower income earners are the ones who are more concerned.
People with higher incomes can tell themselves that they’ll dig their way out eventually. But if you’re bringing in less money and the hits keep on coming… Well, you would begin to despair, wouldn’t you? I know I used to.
Maybe that’s what’s so infuriating to me about this study’s results: I’ve been in long-term credit card debt — and on the lower-income side of things.
Our debt was almost exclusively from necessary spending. It was mostly medical and student debt, along with more doctor bills and other medical-related expenses accrued along the way. (We did spend a little too much on our honeymoon, hence the “mostly.”)
We had to pay off that $30,000 of debt while bringing in just $3,100 a month (with $700 rent and Tim’s $500 health insurance). Because of our lower income (and because I hate owing money, especially at high interest rates), the debt was always considered a crisis. It was always something that we were working on, that our spending had to reflect.
It seems like that just isn’t the case of people who are really carrying debt this long. And I truly don’t understand that.
Some are trying — but many aren’t
Yes, there are people out there who have such significant amounts of debt that it will take them years to pay off. Perhaps a large chunk of respondents were in that group. Unfortunately, the size of the debt doesn’t appear to have been one of the study questions, so we can’t say for sure.
But the average for U.S. households carrying a credit card balance is $9,333. That’s not a small sum, obviously, but Tim and I paid down more than three times that in five years while making less than $40,000 a year. So it doesn’t make sense that people earning $80,000+ are taking so long to pay down debt unless a lot of them simply don’t see it as a priority. Debt isn’t a crisis for them. It’s just a fact of life.
Backing this up is the recent poll that found that 65% of Americans aren’t sure when (or if) they’ll get out of debt. In fact, 25% fully expect to die with debt. Talk about a way of life!
Granted, the debt referenced there included mortgage and student loans, but both of those types come with their own end dates. Which means people know when they’ll be done with their student/mortgage debt. So the real issue must be that Americans aren’t sure when they’ll be done with their credit card debt.
And I get it: You can be hit with emergencies or medical crises that necessitate credit card debt, especially when you’re lower income. But for the average (read: healthy) higher income earner… Well, long-term debt just smacks of a worrisome indifference to debt.
Has credit card debt ever been just a fact of life for you? What shook you out of it?