The average United State household carries approximately $15,355 in credit
card debt. Regardless of the financial trends over the past 15 years,
American credit habits have remained consistent. According to data released
on February 5 by the Federal Reserve, consumers owed a total of $936 billion
in credit card and other forms of revolving debt as of December 2015.
Revolving debt is a credit arrangement that enables a consumer to borrow
against a predetermined line of credit when purchasing goods and services.
Since April 2011, American consumers have added $103 billion in revolving
The majority of American carry debt from month to month and pay high interest
charges on this debt. Only 35 percent of those aged 25 to 50 pay off their
complete balances each month. Even as Americans age they continue to borrow.
In fact, 45 percent of 70 year olds do not pay off their credit card debt
each month. This debt accumulation begins between ages 20 and 30. According
to Boston College professor, Scott Fulford, individuals currently in their
20’s do not seem to be saving in the same manner as generations
that have come before them. In a recent study he reasoned that these individuals
may not be saving because they are “saving just by getting higher
credit limits.” These credit limits provide this population with
the emergency funds if they are needed.
In every age bracket, credit cards are heavily relied upon. While younger
individuals, 20 year olds, tend to use more than half their available
credit, older individuals, 50 years olds, still tend to use almost 40
percent of their available credit. Additionally, credit habits do not
vary much during the course of a consumer’s life. Even when certain
credit habits are disrupted, an individual’s credit use habits are
typically restored within two years.
Americans tend to borrow more during good financial periods and less during
recessions. The corresponding trend seems to be driven by the fluctuations
in credit limits. When banks offer higher limits, consumers take advantage
of this increase. Credit limits have the biggest effects on people who
pay minimums and carry debt forward from month to month. A study conducted
by the Boston Federal Consumer Payment Research Center has shown that
when these “revolvers” were offered a 10 percent increase
in credit limits, they increased their debt by 9.99 percent. A majority
of U.S consumers seem to take advantage on every cent offered to them
by credit card issuers.