America, We Need to Talk About Credit Card Debt Honestly, Starting Right Now

Banks Editorial Team · December 5, 2017

When it comes to credit card debt, America leads the world. Collectively, we’re sitting on top of a $1 trillion debt mountain – a huge chunk of change compared to the $18.57 trillion of GDP we produced in 2016. In fact, this debt is so huge that it is bigger than the GDP of all but 15 countries.

That’s a lot of debt, and unlike mortgage debt, which 65% of Americans also have, it isn’t considered a good debt, as it isn’t always spent wisely. For example, it might be tempting to put that delicious meal on your credit card and pay it off another time, but you won’t have anything of value to show for it later.

In the meantime, many people are eager to find a scapegoat for what is increasingly becoming a major economic issue that will pull all of us down. One solution may be to renegotiate all your debt into a single loan to get more favorable terms. And this way, reduce your monthly payments.

 

 

Finding Someone to Blame Is Easy – But Is It Honest?

Just where is all this debt coming from? The answer is as simple as it is complex, especially when it comes to the millennial generation, which is slowly but surely becoming the largest generation in the workforce and in credit card ownership.

Although unemployment is low at 4.4%, wages have stagnated as the cost of living continues to creep up. Throw an extravagant student loan debt into the mix, and it’s more than Houston that has a problem.

Simply put: People need a little extra cash, and credit cards are an easy way to get it if you want to be an independent adult – and not trapped in Mom and Dad’s basement in your 20s and 30s.

With the average credit card hitting an interest rate of 19% and student loan debt spiraling up to an incredible 186%, millennials have joined the credit card party – and the results aren’t pretty.

Is Credit Card Debt the New Avocado Toast?

A LendEDU report, which quizzed 500 millennials on their plastic and how they used it, drew some interesting conclusions – conclusions that many talking heads were quick to jump on with their usual joie de vivre.

This was hardly surprising, as the report revealed a less than gratifying picture of a generation – or at least 500 members of it – who weren’t quite as savvy with their plastic as they ought to be. 17% agreed that missing a card payment had no effect on their score, but a shocking 6% thought it might improve it.

36% already had hit their card limits, and some 48% were falling hard into the interest trap, paying hefty interest charges from month to month – yet 45% couldn’t tell you their cards’ interest rate. Yes, that’s cards plural – around a quarter hold three or more cards.

Of course, some people took this as a great excuse to go millennial-bashing. Not content with lambasting them for eating avocado toast instead of frugally saving their dollars to buy a home, many more thundered about the fiscal irresponsibility of the youth of the nation. Getting a personal loan to consolidate debt may be a way to get out of debt quicker.

 

 

The Truth Is Simpler – And A Little Harder

Despite all this, Federal Reserve data reveals that the level of Americans under 35 with credit card debt is at its lowest since 1989, as the younger generation has been burned by seeing their parents struggle with their own youthful debt.

It’s a sobering picture from the top of the debt mountain; with the American education system placing so little value on personal finance education, it’s to be expected. It is tempting for millennials and baby boomers to blame each other for the sheer size of the credit card debt mountain – but it is also worth remembering that we were all young and foolish once.

In just a few short years from now, millennials themselves will be shaking their heads at the next generation’s fickle ways. It’s the way life goes, but it won’t fix an issue that affects us all.

We shouldn’t be asking where the debt mountain came from, or who is responsible for it – because as a nation of households, we’re all $15,000 in the red to the tune of student, auto, mortgage, and other debt.

The only way that we can chip away at this mountain is with personal finance education and an understanding of how to best combat our own debt. Unlike previous generations, millennials have a huge reservoir of information and learning that no other generation before it had.

It is this wealth of knowledge that may finally help America tackle its credit addiction problem and finally start to chip away at that mountain.

The best thing? This information is virtually free – and anyone, generation X, millennial, baby boomer, or even the greatest generation can access it.

It’s time for all of us to stop playing the blame game and start taking responsibility for our own fiscal errors. And to start thinking how to get our of debt quicker and smarter.

 

 

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