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Credit card debt growth weighs on Americans

Bankrate released its annual emergency savings report last week, and the results show the impact of credit card debt.

According to the survey, forty-nine percent of all respondents have less emergency savings than they did in 2022. (Thirty-nine percent have less in their emergency savings account; ten percent have no emergency savings this year.) In 2021, thirty-four percent of respondents said they had less in their emergency savings account than they did in 2020.

The reliance on emergency savings or the inability to set aside money is making life difficult on American households. Current survey results show that 36% of Americans have more credit card debt than emergency savings. Fifty-one percent say they have more savings than debt, and 13% say they have neither credit card debt nor savings. The Bankrate survey results imply that many American households are either draining their savings or using their credit cards to cope with economic challenges like inflation and changes in employment or income.

More than two-thirds of respondents say that their current savings would not cover their living expenses for one month if that became necessary. Among those respondents, 85% of Generation Z workers say their savings would not last a month if they lost their jobs. This is an especially important finding. These workers, who recently graduated from either high school or college, are not earning enough to build emergency savings.

Although some people would think that having no credit card debt and no savings would be a tenable position, it’s not. It means that 13% of survey respondents have no way at all to respond to unexpected expenses. A single medical bill, an unexpected car repair, rising interest rates, a job loss or even inflation can put these individuals into serious financial trouble.

Credit card debt signals need for more high-wage jobs

The analysis of survey respondents shows that having a college degree has a protective effect on revolving debt. Forty-two percent of respondents without a college degree had more credit card debt than savings. On the other hand, only 29% of respondents with a college degree had more revolving debt than cash on hand. Income also has a significant impact on the amount of credit card debt a person has. Forty-one percent of people with household incomes of less than $50,000 had more credit card debt than savings. Comparatively, twenty-eight percent of people with household incomes of at least $100,000 had more debt than savings.

Regardless of age, respondents in all generational groups said they had more credit card debt this year than they did in 2022. Generation X respondents – those between the ages of 43-58 – accumulated the largest increase in installment debt in the past year. In 2022, 24% of Gen Xers reported that they had more unsecured debt than savings. In just twelve months, that percentage increased to 44%. The percentage of Baby Boomers with more credit card debt than savings jumped from 15% to 25% during the year.

That also has significant implications. These workers – some of whom have already retired – have the greatest need to save money or decrease spending. Yet a growing number of these respondents are farther away from financial well-being this year than last year.

This survey should raise alarms, especially at community colleges. Offering degree programs that enable graduates to earn a living wage is critical to the financial well-being of households in the district. According to this study, the watermark is at $50,000. Promoting non-degree certificates and training for low-wage occupations perpetuates the problem; we need solutions that address it.

Photo Credit: Images Money, via Flickr