Wallet Hub Credit Card Debt Study

WalletHub recently published a report earlier this month highlighting showing how credit card debt is increasingly becoming a thorn in the side for U.S. consumers. It captures how many Americans’ successes in paying down their balances in 2020 didn’t stick. Consumers instead took on record-high debt during 2021. Evidence suggests that assuming it is becoming increasingly dangerous is detailed below.

 

How Serious of a Problem Is Credit Card Debt Becoming?

Many American consumers paid down their balances in 2020. Those efforts didn’t linger for long in 2021, though. Americans’ overall balances increased by $44.9 billion and $23.6 billion in Q2 and Q3. Researchers expect it will raise another $70 billion once the numbers are entirely in for 2021 for a total of $138 billion, a staggering amount considering how the annual debt average was $46 billion in the ten years leading up to that. 

The Q3 increase specifically marked a 46% increase over the post-recession average for the same year. The added burden that consumers took on during Q3 increased by 2.11% over Q2. The charge-off rate in Q3 was 1.67%, 34.3% less than the prior quarter.

 

How High Are the Average American Household’s Balances?

The WalletHub study shows that the average American household’s burden decreased by 2.7 between Q3 2020 and Q3 2021 to $8,006. At the same time, the overall balances amount for the entire U.S. population increased by 2.9% to $951.6B during that same time. WalletHub researchers have forecasted the average American household’s credit card debts breaking point to be around $11,050.

 

Are Certain Areas Affected By This Burden More Than Others?

Wallet Hub found that some cities’ residents seem to be more likely to tackle these financial woes than others. A few cities within California, Wisconsin, New Jersey, Maryland, Washington, and Pennsylvania made it on the most-sustainable list. Ones that are less likely to sustain their balances amassed include the south Florida cities of Miami and Hialeah, three Texas cities, and one each in Montana, Tennessee, Mississippi, Arizona, and Nevada.

 

Steps You Can Take if You’re Financially Underwater

Financial analysts recommend the following approaches for tackling your outstanding balances:

• Paying off your highest balance first
• Taking advantage of opportunities to better your credit score
• Creating a budget and adhering to it
• Funding a “rainy day” fund to tap into when emergencies arise

Another strategy that financial analysts recommend helping you get ahold of your financial situation is to find a better-paying job or to acquire skills that would allow you to do so.

 

Additional Strategies for Tackling Your Outstanding Balances

If the earlier solutions aren’t viable options for you, then WalletHub’s analysts offer a few different strategies:

• Procuring a 0% annual percentage rate (APR) card is a practical approach if you have a smaller balance that you want to transfer interest-free for as long as 20 months.
• Entering into a debt settlement arrangement with your creditor involves you paying a little less than you initially owed to your creditor and then eliminating the rest.
• Taking out a personal loan: Provided that the interest rate is low enough, this may be a good option for reducing your monthly repayment obligation
• Entering into a debt management plan: This is a solution you’d negotiate with your creditor. It may involve them lowering your interest rate, dropping fees, or extending out your repayment period so that your obligation to pay is more manageable

Financial analysts often describe bankruptcy as an option of last resort. It can be a particularly attractive option if your debts become so high that you have little to no prospect of paying them off in any reasonable amount of time.

 

What Are Key Takeaways About Credit Card Balances?

Americans currently find themselves overburdened by credit card balances. Some analysts would even point to the current statistics and say that the extension of credit is becoming a bit predatory, considering how there are diminished prospects of consumers being able to reasonably repay what they’d owe. 

Consumer protection firms like ours advocate for consumers who find themselves facing unexpected financial situations.