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Credit cards are a growing problem for everyone.
Overall, Americans have $830 billion in credit card debt as of the second quarter of 2019, a 6% jump year over year, according to the most recent report from Experian. It is the second-fastest-growing type of debt, after personal loans, Experian found.
The average American now carries a credit card balance of nearly $6,200, according to Experian, also up from a year earlier.
At these levels, fewer cardholders can pay their balances in full at the end of each month.
And U.S. adults with a net worth of $100,000 or more are more likely to carry credit card debt than those with fewer assets, Bankrate said.
In fact, those with a net worth between $100,000 and $199,999 are the most likely to carry credit card debt, followed by people with a net worth between $200,000 and $1 million. Adults worth more than $1 million were the least likely to carry such high-interest debt, Bankrate found.
Ted Rossman, industry analyst for CreditCards.com, faulted “lifestyle creep.” Today’s “keeping up with the Joneses” mentality is hard to resist, several other studies have also found.
“It doesn’t make sense to finance a fancy lifestyle with credit card debt,” Rossman said. “That’s costing you a lot of money over time and risking your financial stability.”
Despite 10 years of economic growth, consumers are still just barely keeping up, he said. “It’s a warning sign.”
While household income has grown over the past decade, it has failed to keep up with the increased cost of living over the same period.
To bridge the gap, more Americans rely on credit cards as one of the most expensive ways to borrow. Credit card rates now stand at 17.4%, on average, only down slightly from a record high of 17.85%
Even a mild recession coupled with very high card rates could cause a lot of pain for card debtors, Rossman said.
Among those with a net worth of more than $100,000 who have credit card debt, more than half owe at least $2,500 and 39% owe at least $5,000, Bankrate found.
If you only made the minimum payments on a $5,000 balance, it would take roughly 20 years to pay off, according to Rossman.
Better yet, “start an emergency savings fund, take on a side hustle, sell stuff you don’t need around the house or get a zero-balance transfer offer and set some money aside,” Rossman advised.
“Even if you have amassed substantial wealth on paper, you need to pay off your credit card debt ASAP,” he said.
Bankrate.com polled more than 2,500 adults in November.
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