SAN FRANCISCO, Dec. 11, 2017 /PRNewswire/ -- According to NerdWallet's 2017 American Household Credit Card Debt Study, U.S. consumers now have $12.96 trillion in total debt. Almost half of U.S. households now carry credit card debt according to the most recent data from the U.S. Federal Reserve, and NerdWallet's study found that those households have an average balance of $15,654.
Credit card debt remains one of the most expensive types of debt, and households that carry it pay an average of $904 per year in interest alone, assuming an average annual percentage rate of 14.87%. The average cost of interest is expected to reach $919 per year following the Federal Reserve's next rate increase.
"With many expenses growing faster than wages, consumers are often forced to take on credit card debt to pay medical bills and other essentials," says Kimberly Palmer, NerdWallet's credit cards expert. "While credit cards are appealing, debt can quickly weigh down household budgets if the balances aren't paid off in full each month. To get out from under credit card debt, consumers often have to cut back other parts of their spending or increase their earning power — not easy things to do in the current economy."
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The 'Why' Behind Debt Levels in the U.S. NerdWallet's 2017 American Household Credit Card Debt Study analyzes data from several sources, including the Federal Reserve Bank of New York, the Federal Reserve Bank of St. Louis and the U.S. Census Bureau. Key findings include:
Credit card interest is costly and continues to rise. The average U.S. household with revolving credit card debt pays $904 in interest annually. This interest total will grow to $919 the next time the Federal Reserve increases rates a quarter of a percentage point.
Millions of Americans likely charge costly medical bills to credit cards. Up to 27 million U.S. adults are putting medical expenses on credit cards, costing consumers more than $12 billion. Consumers who charge medical bills to credit cards pay an average of $471 in interest on these expenses, and take an average of 70 months to pay the balance off.
Major expenses continue to outpace income growth. The costs of major expenses — like medical care and food — have outpaced income growth over the past decade. Median household income has grown 20% in the past 10 years, but expenses have grown significantly more. Medical costs have increased 34% over the same period, while housing and food have gone up, too — 20% and 22%, respectively.
Total household debt has surpassed pre-recession levels: Total household debt, now $12.96 trillion, has surpassed the amount owed at the beginning of the Great Recession, which was $12.37 trillion.
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