A majority (72%) of high-income American households with an annual income of $100,000 or more and credit card debt have carried that debt for more than a year, according to a report released Monday by Bankrate.
This percentage falls to 70% for households with annual incomes between $80,000 and $99,999. For households with annual incomes between $50,000 and $79,999 it dropped to 63% and then to 53% for households with annual incomes under $50,000.
Overall, the report found that credit card holders have more debt than ever, with 47% of card holders carrying debt from month to month, up from 46% in December and up from 39% in December 2021. In addition to high inflation for more than a year driving up prices and thus cost-of-living expenses, the Federal Reserve Bank has pushed up interest rates multiple times in an effort to tame this inflation.
During this process, prices are inflated and credit card payments are higher, putting extra pressure on consumers. Per Bankrate, the Fed’s interest rate hikes have raised the average credit card interest rates to more than 20%, making it harder for people who hold debt to pay it down.
A Tuesday press release from the Federal Reserve Bank of New York revealed that credit card balances increased by $45 billion in the first quarter of this year. Aggregate limits on credit card accounts increased by $9 billion to stand at $4.6 trillion.
Bankrate said emergency expenses are the main driver of credit card debt.
“Unexpected or emergency expenses are the main reason for carrying credit card debt, with 43% citing this cause,” said Bankrate. These include car repairs and medical bills – each cited by 10% of survey respondents – followed by home repairs (8%). A quarter of respondents also said they took on credit card debt to cover everyday expenses – that’s up 1% compared to the same time last year.
While more high-income household have held debt for a longer period of time, lower-income households are more likely to carry card balances.
For example, 53% of cardholders with annual household incomes below $50,000 had credit card balances, compared to just 38% of cardholders with annual household incomes of $100,000 or more.
Bankrate offers some tips for reducing credit card debt as the high inflation, high interest rate conditions continue. These include researching 0% balance transfer cards and prioritizing credit card debt payment.
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