Nearly Half of Millennials, Gen Xers Have More Credit Card Debt Than Savings.
Putting extra money in a savings account for the unexpected expense or emergency is a good rule of thumb. Unfortunately, for many American consumers that concept is nowhere near reality. In fact, according to a recent Bankrate study, nearly half of Americans between the ages 27 and 58 have credit card debt balances that exceed how much they have in savings.
Bankrate found that approximately 45 percent of consumers in the Millennial and Generation X categories reported that they were carrying credit card balances that were greater than their savings or emergency funds. What this means is a growing number of American consumers are relying more on credit than they are savings to get themselves through tough economic times.
At the end of 2022, the nation’s credit card debt hit a record figure of $930 billion, according to figures from TransUnion. Interest rates have consistently been increasing over time and are at an average of 19 percent (19%) for existing accounts and 22 percent (22%) for new applicants, according to NerdWallet.
What this means is more American consumers are relying on expensive credit card debt to get by. This presents a problem when it comes time for them to try to receive approval for financing in the future, such as to purchase a car or take out a mortgage on a new home.
According to the Bankrate survey, only 51 percent (51%) of American consumers in all generations have more savings than credit card debt. Thirty-six percent (36%) said they had more credit card debt than savings. Thirteen percent (13%) said they had neither credit card debt nor savings.
Bankrate found that the percentage of consumers who are carrying more credit card debt than savings is the highest seen in the past 12 years. The growth of this percentage is even more concerning since only 22 percent (22%) of all consumers surveyed said that their credit card balances exceeded their savings as of January 2022.
Forty percent (40%) of those surveyed by Bankrate said that they have less money in an emergency savings account than they did one year ago. In comparison, only one-fourth or 25 percent (25%) of those surveyed said they had more savings now than a year ago. These numbers are not surprising considering the fact that consumers are struggling with high inflation and increasing interest rates, both of which are economic factors that make it much harder to save.
Without an emergency savings fund, the average American household will likely struggle to cover an unexpected or emergency expense. It is estimated that only 43 percent of American consumers can cover an unexpected $1,000 expense with savings. Without the money to pay off this expense, they rely on credit cards instead. Depending on how much the expense is, how high the card’s balance was at the time of purchase, and the interest rate associated with the credit card, the consumer may find himself or herself in an uphill battle to pay down the new balance.
As bankruptcy attorneys, we see credit card debt as one of the most common problems facing those with serious financial challenges. It is not surprising with the high interest rates, unreasonable fees, harassing debt collection calls, penalties and never-ending minimum payments that do not even make a dent in your actual debt.
Filing for bankruptcy is a viable option for those struggling with insurmountable credit card debt. Chapter 7 is the fastest form of consumer bankruptcy and forgives most unsecured debts like credit card debt, medical bills, and personal loans. There are certain qualifications a consumer must meet in regard to income, assets and expenses to file for Chapter 7 bankruptcy, which is determined by the bankruptcy means test.
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If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.
