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Thought Leadership Blog

debt-by-type_infographic_02-12-19

How Will Household Debt Affect Americans in 2019?

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As of February 2019, for the 18th consecutive quarter, household debt reached a record high—and was $865 billion above the debt levels at the beginning of the recession in 2008. But unlike a decade ago, where the primary cause for the recession was mortgages, today, the main culprit is ballooning student loans, credit card debt, and auto loans.

Today, Americans' household debt is at its highest level ever—and it’s on pace to top $4 trillion in 2019.1 What’s more, credit card balances are at all-time high as well. In 2018, Americans paid banks $110 billion in credit card interest and fees, up 13% from the $98 billion in interest paid in 2017, and up 45% over the last five years, as Fed rate increases have been passed on to consumers. 2 Exacerbating the situation are credit card “interest rates with APR’s averaging 16% to 17%,3 which is the highest in decades.

And although the Fed originally forecasted the rise of interest rates in the coming year by three more rate hikes, they’ve recently changed their plan to a wait and see approach.

When it comes to debt trends, “in 2017, Generation X surpassed the baby boomer generation to have the highest credit card balances. A report from Experian estimates that on average, Generation X has a balance of $7,750 per person, 21.94% more than the national average ($6,354). Boomers carry nearly as much as Generation X with an average balance of $7,550.” 4 Whereas millennials, “who are often characterized as frivolous spenders and are too quick to take on debt, have nearly the lowest credit card balances. Their median balance clocks in at $4,315. The youngest generation, Gen Z, [from those who are old enough to have debt, have] the smallest average balance of $2,047 per person.” 4

With or without the possibility of interest rate hikes, and despite the crippling recession a decade ago, Americans are still not saving more money. In December 2018, the personal saving rate dropped to 6%, its lowest level  of savings for half a century [with the exception of the crazy credit-fueled days of the early 2000s]. Furthermore, in a recent Federal Reserve survey “35% of U.S. adults reported that they would not be able to pay all of their bills if faced with a $400 emergency.” 5

Financial institutions like USAA, BBVA and other forward-thinking institutions focused on consumer advocacy are at the forefront of empowering their customers to become financially savvy with digital budgeting tools that help their customers address and reduce the burden of financial stress.

  1. https://www.wsj.com/articles/u-s-economy-fuels-boom-in-consumer-debt-11546007400
  2. https://finance.yahoo.com/news/consumer-debt-track-reach-4-trillion-2019-203504452.html
  3. https://www.federalreserve.gov/releases/g19/HIST/cc_hist_tc_levels.html/
  4. https://www.magnifymoney.com/blog/news/u-s-credit-card-debt-by-the-numbers628618371/
  5. https://www.americanbanker.com/news/consumer-debt-is-at-an-all-time-high-should-banks-be-worried