U.S. Households Owe More Than $15 Trillion in Debt
Tuesday, January 18th, 2022
NerdWallet, Inc. (Nasdaq: NRDS), a website and app that provides consumers and small businesses with trustworthy financial guidance, found that household debt is on the rise, with the average indebted U.S. household owing $155,622. According to NerdWallet's annual American Household Credit Card Debt Study, American households hold $15.24 trillion in debt nationwide, an increase of 6.2% from the amount of household debt owed a year earlier.
The study, which includes a survey conducted online by The Harris Poll on behalf of NerdWallet of more than 2,000 Americans aged 18 and older, found that Americans who have been financially struggling over the past year point to both lower income and higher expenses as reasons why. More than a third of Americans (35%) say their household financial situation has gotten worse over the past 12 months. Of that group, 38% say it's because their household income decreased overall, and 36% say it's because their household expenses increased overall.
Pandemic relief programs, including stimulus payments and the expanded child tax credit, have also helped Americans withstand financial hardships, according to the survey. More than three-quarters of Americans (78%) have received some form of pandemic relief since March 2020, with paying for necessities (43%) and adding it to their savings (43%) being the top uses they say they found for this money. Additionally, some Americans used credit cards as a lifeline during the pandemic – 18% of Americans say they relied on credit cards to pay for necessities during this time, and 17% relied on them for emergencies.
"As the pandemic continues, many consumers are still facing financial hardships – and rising costs for life essentials like groceries, gas, and medical needs can be an additional hurdle," said Sara Rathner, a credit cards writer at NerdWallet. "Leaning on a credit card to make ends meet can be costly, but during a difficult time, it can be a necessary fallback. Consumers whose finances have improved this year may be setting lofty money goals, but it's equally admirable to focus on the basics, like adjusting your budget or rebuilding an emergency fund."
The study also found that:
The cost of living has been rising faster than income in recent years: Median household income has fallen 3% over the past two years, while the overall cost of living rose 7% – a reversal of a decade-long trend in which income growth has exceeded inflation.
Falling revolving credit card balances mean lower interest charges: The average household with revolving credit card debt – meaning credit card balances carried from month to month – owes $6,006, down almost 14% from the year prior. As a result, consumers are paying less interest;. U.S. households that carry credit card debt will pay interest charges of $1,029, on average, this year, down nearly 11% from the year prior.
Mortgage and student loans debts are on the rise: Mortgage debt is 8.2% higher than the year prior, at an average of $207,861 per household with mortgages. Meanwhile, student loan balances rose about 2.5% over the past year, to an average of $59,042 per household with student loan debt.
The full study, including charts and other visuals, can be found here.