U.S. Credit Card Debt Hits All-Time High, And Overdue Payments Rise For Young People

Feb 13, 2020
Originally published on February 13, 2020 6:29 pm
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Americans owe nearly $1 trillion in credit card debt, and that's an all-time record high according to a report out this week from the Federal Reserve. And delinquencies, or overdue payments, are rising, especially among young people. Joining us now to talk about this is NPR's Chris Arnold. Welcome back, Chris.

CHRIS ARNOLD, BYLINE: Hey, Audie.

CORNISH: What's the scale of the problem? Because I understand it's hit young people especially hard.

ARNOLD: Right. So we have these new numbers. And if we look at 18 to 29-year-olds, nearly 10% of them now have credit card debt that's 90 days plus - I mean, more than 90 days past due. And that's a pretty big red warning light on the dashboard for some economists because that's moving back up into the delinquency realm that we saw - I mean, not quite there, but during the Great Recession. I mean, you know, we're inching back up in that direction. I talked to Lucia Dunn. She's an economics professor at Ohio State University. And she says a lot of young people are getting squeezed because they also have student loan debt.

LUCIA DUNN: Those of us who study debt feel that the student debt and the credit card debt are interacting for young people. Strapped with these huge payments they have to make on the student loans, they put a lot of their purchases now on credit cards, so it's just digging the hole deeper. We're very concerned about it.

CORNISH: I imagine a lot of people are late on those student loan payments as well.

ARNOLD: Yeah. Actually, in one of the footnotes in this Fed study, there's an estimate that it could be more than 20% of student loans are more than 90 days late on the payments, and that's a very big number. And this is happening, you know, when the economy is strong. The vast majority of Americans have jobs, so people that are struggling now are probably going to be in worse shape when we hit the next downturn. And for people who do fall deeper into debt, Dunn says this can be a major stress that affects people's lives both financially and also emotionally.

DUNN: It's impacting people's family life. It's impacting their job performance, and it's impacting their health.

CORNISH: Chris, this is such a different picture from what we're hearing about this economy - right? - that it's so strong and good for workers.

ARNOLD: Right. You know, and some of this, though, is a function of the fact that the economy is strong because you've got - more people have jobs, so there's more people out there with credit cards, using credit cards. And some economists actually see this as a good sign, as a sign of confidence because, you know, it's like, well, I'm going to go on vacation. And I'm going to put it on my credit card, and I can pay it off because I feel pretty good about my job. We should say, too, that that's not the best personal finance move, that it's much better to save the money because interest rates are very high on credit cards. But Americans tend to like their credit cards. And so far, most people are able to pay the bills.

CORNISH: Credit card debt is rising. You've described it. Young people are getting squeezed. The country is not sliding back into some kind of scary scenario with debt, like the financial crisis, though. Is that what you're alluding to?

ARNOLD: Right. You know, I think that's a big takeaway here, is to not get too freaked out about these rising numbers. I talked to John Silvia. He's an economist with the consulting firm Dynamic Economic Strategy. He says when you look at the payments Americans overall have to make on their credit card bills or other debts...

JOHN SILVIA: Interest payments are remarkably low relative to personal income. So no, I don't think we're sliding back. I don't see a debt crisis looming.

ARNOLD: So, you know, debts are bigger, but people have more money. And most Americans are in much more solid financial shape than before the last recession.

CORNISH: That's NPR's Chris Arnold. Thanks for explaining it.

ARNOLD: You're welcome. Transcript provided by NPR, Copyright NPR.