No End In Sight For 2 Out Of 3 U.S. Adults With Debt, Poll Says
USA – January 16, 2019
As the longest government shutdown in US history has reached its 25-day milestone, the furloughed government employees are forced to tap into their savings and rely on credit cards or crowdsource funds to make ends meet. Many Americans who are already in debt either have no idea when they’ll break free from it or have resigned themselves to owing money for life.
A new poll by CreditCards.com found over 65 percent of U.S. adults with debt don’t know when or if they’ll ever get out of it. That group includes 41 percent who don’t know when they’ll pay off what they owe and 25 percent who expect to carry their debt to the grave.
These numbers have fallen slightly since January 2018, when 68 percent of U.S. adults had no idea when or if they’d get out of debt, including 30 percent who predicted they would die in debt.
The most common debt amongst U.S. consumers is a mortgage (54 percent) followed closely by credit card debt (53 percent). Auto loans were the third most common type of debt (47 percent) while fewer people owed student loans (21 percent), medical debt (13 percent) or a personal loan (11 percent). Fortunately, less than one percent owe a payday loan.
“I’m not surprised that number is so high,” Scott Hoyt, senior director at Moody’s Analytics, says of the percentage of consumers who don’t know if or when they’ll pay off what they owe. “A lot of folks don’t really have a plan for getting out of debt,” he says.
Americans continue to pile up debt, even as the survey results underscore that people consider adding debt to be financially unwise. In November 2018, The Federal Reserve Bank of New York’s Center for Microeconomic Data today issued its Quarterly Report on Household Debt and Credit, which shows that total household debt increased by $219 billion (1.6%) to $13.51 trillion in the third quarter of 2018. It was the 17th consecutive quarter with an increase and the total is now $837 billion higher than the previous peak of $12.68 trillion in the third quarter of 2008. Furthermore, overall household debt is now 21.2% above the post-financial-crisis trough reached during the second quarter of 2013.
The survey of 1,000 U.S. adults, conducted online from Dec. 7-9, 2018 (see methodology) also found:
• Consumers plan to carry debt into middle age. When asked to predict how old they’ll be when they get out of debt, those who answered gave an average age of 53.
• Millennials expect to be in debt longest. Millennials, who are now 18 to 37 years old, said on average they will get out of debt at age 43. Generation Xers, who are now 38 to 53, said age 54. And baby boomers, ages 54 to 72, guessed an average age of 66.
• More middle income households carry card debt. Of consumers in households that make $30,000 to $49,999 per year, 71 percent owe credit card debt, compared with an average of just over half (53 percent) across all income brackets. Why? Lower income households might have a harder time getting approved for credit due to stricter lending standards in recent years, while higher income households might be able to pay off debt more easily, Hoyt says. “It’s the middle income folks who are in the most difficult position,” he says.
• Higher earning households will spend longer in debt. However, Americans from households that bring in $50,000 or less per year predicted they will be out of debt at an average age of 47. In contrast, debtors from households making $50,000 or more gave an average age of 55.
Consumers rack up debt in many ways. Being deep in debt with no plan to get out of it affects your finances and ultimately your prospects for a comfortable retirement, says Steve Rhode, a consumer debt expert.”
There are many circumstances that can lead to too much consumer debt, says author and financial expert Harrine Freeman. Some people overspend on a purchase like a vacation or a new TV, some get hit with a medical crisis and others may have an emergency they lack the savings to cover.
“Maybe the boiler went out or they need a new roof,” Freeman says. “There are tons of reasons why people get into debt.”
Of course, type of debt matters when considering the negative effect on your life, and some types of debt are worse than others.
“I would look at dying with a mortgage on your property as different than dying with $50,000 in credit card debt,” says Douglas Boneparth, co-author of The Millennial Money Fix: What You Need to Know About Budgeting, Debt and Finding Financial Freedomand president of BoneFide Wealth, a financial advisory firm.
“Not everybody is going to pay off their mortgage in their lifetimes, and people use the equity in their homes in various ways,” he says.
But that debt you racked up on a card to buy a new outfit or gadget is a different story.
“Consumer debt is a massive killer for all other financial goals,” Boneparth says.
“You definitely have to have a plan to get out of debt,” Freeman says. “You can’t just wish on a star.”
The analysis by CreditCards.com also found New Mexico carries the heftiest debt load in the nation while Massachusetts has the lightest. And Southern states took 9 of the top 10 spots for states most burdened by debt.
It would take New Mexico residents 17 months to pay off their average total credit card debt of $8,323 by paying almost $585 a month, and they’d fork over almost $1,320 in interest. In the states with the second and third biggest debt loads, Louisiana and West Virginia, it would take about the same amount of time to get out of card debt. However, that’s not always the case. Alaska took first place for heaviest debt load in 2016. But the state has since plunged to 12th place, improving despite glacial income gains through 2017 and much of 2018. And Alaska still has the largest total credit card debt of any state, an eye-popping $10,685.