Consumers love to spend and according to a new Credit Card Debt Study, they’ve racked up $67 billion in credit card debt during 2018, sending outstanding debt to an all-time record high.
The study conducted by WalletHub.com also released its nationally representative 2019 Debt Survey, which highlights consumers’ feelings about over-borrowing, including the fact that 156 million Americans admit they’d go into debt for frivolous purchases.
“The debt picture is worrisome nationwide, but some areas have bigger payment problems than others. WalletHub also compared the amounts owed to credit card companies by people in more than 2,500 U.S. cities – specifically, how those balances changed in 2018,” the website reports.
Here are some highlights from these reports below.
|Cities with the Biggest Debt Increase||Cities with the Biggest Debt Paydown|
|Huntington Beach, CA||Tempe, AZ|
|Denton, TX||West Valley City, UT|
|Springfield, IL||Norman, OK|
|Murrieta, CA||High Point, NC|
|Wichita Falls, TX||New Bedford, MA|
|San Mateo, CA||Yakima, WA|
|Germantown, MD||Miami Beach, FL|
|Greenville, NC||Champaign, IL|
|Newport Beach, CA||Santa Fe, NM|
|Hoover, AL||Warwick, RI|
Key Findings from the website’s experts:
- Trillion-dollar starting point. U.S. consumers began 2019 with a record $1.03 trillion in credit card debt.
- Costly holiday season. Last year began with consumers repaying more than $40 billion in credit card debt during Q1, but it concluded with $108 billion in new debt being added to the books over the next three quarters.
- Expect a debt-driven 2019. WalletHub projects that consumers will rack up another $60 billion in credit card debt during 2019.
- Billions in debt beats political gridlock. Nine in 10 Americans report their personal finances are currently run better than the federal government. Three times more Democrats than Republicans think another recession will happen within two years.
- The bill will come due for Millennials. Young people are 35 percent more likely to go into credit card debt for frivolous purchases than people age 45+.
- Millions would bare-all before exposing their finances. Overall, 1 in 5 Americans say they would be more embarrassed by financial nudity than physical nudity. Women are 54 percent less likely than men to be embarrassed by people seeing how much credit card debt they have.
- Desperate times breed desperate measures. More than one-third of people (36 percent) say they would do ANYTHING to get out of credit card debt. Millennials are four more times more likely than Baby Boomers to agree to house arrest for a year in exchange for credit card debt freedom.
“Credit card use for frivolous purchases is a habit that you develop over time; you have done so for a long time and you got used to it,” said Demetri P. Tsanacas, a professor of business at Ferrum College in the WalletHub.com report. “Old habits are hard to give up.”
There may be a silver lining, however. At least people are being open about their personal finances, which is not always easy. For example, 21 percent of WalletHub’s survey respondents said they’d be more comfortable baring all physically than exposing themselves financially. And that figure jumps to 30 percent among men.
The good news? More than 9 in 10 people say they are at least one year away from debt freedom. That timeline could get a whole lot longer if the economy takes a tumble first, however, the study said.
“Where the problem arises is when borrowers accumulate large credit card debt they can really not afford during a period of economic growth, and then suffer a job loss or reduction in income during a recession,” said Kevin Jacques, the Murch Chair in Finance at Baldwin Wallace University, in the report.
“My advice is that while the economy is growing, develop a step-by-step plan as to how you are going to get out of credit card debt. Stick to that plan and recognize that you may be vulnerable should a recession occur. Plan accordingly and in your step-by-step plan, decide how you would continue to work to pay off your credit card debt should you suffer a loss or reduction in income.”