Poll: 72% of those with credit card debt have added to it in the last year

With the rise in inflation over the last two years, consumers are finding it increasingly difficult to keep their heads above water financially, it seems.

According to a survey conducted by YouGov for CreditCards.com at the end of 2022, about three-quarters (72 percent) of those with credit card debt added to it in the past year.

Most U.S. consumers (70 percent of adults) hold some form of personal debt, with credit card debt being the most common form (41 percent having credit card debt).

Credit card debt is on the rise

The rise in credit card debt is not surprising, given the rise in inflation and costs, which has pushed up prices of goods and services and also caused variable credit card rates to go up to about 20 percent, at the time of writing, alongside Federal Reserve rate hikes.

Almost half of those (48 percent) who have added to their credit card debt in the last year point to the rising costs that accompany inflation as the culprit, while 34 percent say it’s because of rising interest rates. And 24 percent blame it on a disruption in their household income.

Not surprisingly, 75 percent of lower-income households (less than $50,000 in annual income) and middle-income households (between $50,000 and $99,999 in annual income) added to their debt in the past year, compared to 65 percent of upper-income households (more than $100,000 in annual income).

Unexpectedly, 49 percent of middle-income households are more likely to have credit card debt, compared to 42 percent of upper-income households and 39 percent of lower-income households.

There’s also a generational divide in terms of credit card debt, with older people more likely to carry credit card debt. Generation Z is least likely to carry this type of debt (18 percent), whereas baby boomers and Generation X cohorts are most likely to do so (49 percent respectively for each of these groups). Millennials fall in between, with 38 percent of this group having credit card debt.

Consumers are actively strategizing to pay down the debt

It seems most cardholders (92 percent) are actively looking for ways to shed their credit card debt. Paying more than the monthly minimum payment required proved to be the most popular method of resolving debt among cardholders at 61 percent. By generation, this method was attractive among older consumers who likely have more disposable income, with 69 percent of baby boomers and 61 percent of Gen Xers more likely to adopt this route. Millennials and Gen Zers were comparatively less likely at 53 percent and 48 percent, respectively.

“If you have a lower credit score or just want more help, reputable nonprofit credit counseling agencies such as Money Management International can often put together debt management plans along the lines of 6 percent interest over four to five years,” advises Ted Rossman, senior industry analyst at CreditCards.com.

He adds, “Don’t forget about the fundamentals, either. Look for ways to raise your income and cut your expenses to turbocharge your debt payoff journey.”

It seems cardholders are doing just that, with 43 percent looking to tackle the debt by cutting expenses and 18 percent generating additional income by taking on a side job or working more hours.

Younger generations are more likely to seek additional income, with 33 percent of Gen Zers and 30 percent of millennials already doing it. On the other hand, only 7 percent of baby boomers and 21 percent of Gen Xers are trying to generate more income to pay down their debt.

Those with credit card debt also have to decide which debt payments to prioritize and pay off first. One plan is to tackle the smallest debts first, so as to gain momentum and be more encouraged as you make inroads into your debt. This so-called snowball technique is popular with 17 percent of debtors.

Others (15 percent) prefer to pay off the debt that carries the highest interest rates first, also known as the avalanche technique.

How long will it take to pay off debt?

There’s also a note of optimism on the debt payoff front, with more debtors believing they can pay off their credit card debt quickly. Forty percent of credit card debtors anticipate they can pay all of it within a year, compared to 30 percent of respondents in a 2021 Bankrate survey. And 79 percent of those with credit card debt, featured in the current survey, see themselves paying off the debt within five years, compared to 60 percent in the 2021 survey.

Other forms of personal financial debt held by Americans include mortgages (27 percent), auto loans and leases (24 percent), student loans (16 percent), medical debt (14 percent), personal loans (13 percent), home-equity loans or lines of credit (7 percent) and payday loans (5 percent).

Considering all these forms of personal financial debt they carry, 66 percent of consumers expect to be free of debt within a decade and 18 percent expect it will take them more than a decade to reach this goal. Another 9 percent don’t know how long it will take them to be rid of the debt, while 8 percent expect to die in debt.

Bottom line

Consumers have added to their credit card debt in the last year, hit by the double whammy of inflation and rising credit card interest rates. Nevertheless, the majority of people with debt are actively strategizing to pay it off. While older generations are more likely to be making more than their minimum payments, younger generations are more inclined to cut expenses or look for additional sources of income.

While debt can feel overwhelming, there are a number of ways to tackle it, Rossman says. For one, debtors could get a balance transfer credit card with a 0 percent intro APR offer, which would help them avoid high interest rates for two years. And if you have good credit, a low-rate personal loan that will allow you to consolidate your debt is another option to consider. Debtors could also turn to a non-profit credit counseling agency to make a plan for them.

Methodology

CreditCards.com commissioned YouGov Plc to conduct the survey. All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2,392 U.S. adults, of whom 1,002 have credit card debt. Fieldwork was undertaken between Dec. 28, 2022 and Jan. 3, 2023. The survey was carried out online and meets rigorous quality standards. The figures have been weighed and are representative of all U.S. adults aged over 18.