Young Adults in Much Greater Credit Card Debt than Previous Generations
A new study shows that younger Americans are adding more credit card debt than previous generations and paying it off at a slower rate.
The Ohio State study shows that a person born between 1980 and 1984 has an average credit card debt that is $5,689 higher than his or her parents’ generation (those born 1950-1954), and $8,156 higher than the grandparents’ generation (people born 1920-1924).
The younger generation is also paying off debt more slowly. The payoff rate is 24 percentage points lower than their parents’ generation and approximately 77 percentage points less than that of their grandparents.
“Credit is more readily available now, and there have been changes in interest rates and less stigma attached to having credit card debt, which may all make younger people today more willing to go into debt,” said Lucia Dunn, co-author of the study.
The study gives a reminder that consistently increasing the minimum payment lets borrowers pay off substantially more and eliminate their debt years earlier. Simply increasing the minimum payment by one percentage point increased the average payoff rate by 1.9 percentage points; increasing the payoff rate from 2 percent to 4 percent increases that average payoff rate by 3.8 percentage points.
The study followed a total of 32,542 respondents during the 13 years from 1997 to 2009.