Struggling With Credit Card Debt? So Are Millions of Americans

Credit cards are normally associated with shopping sprees, meals out at expensive restaurants and other acts of consumer whimsy, where people throw caution to the wind and say: "Charge it!"

But with the cost of living rising, Americans aren't using credit cards to splash out on designer clothes or spa weekends as much as they are to pay for basics like food and gas. As the mountain of America's credit card debt reaches the $1 trillion mark, people are getting worried.

A majority of 55 percent of Americans are either "very" or "fairly" concerned about their ability to pay off their credit card debt this year, according to an exclusive Newsweek poll conducted by Redfield & Wilton Strategies. If we include those who are only "slightly" concerned, the percentage goes up to 74.

"American consumers have been actively using their credit cards to navigate costs associated with inflation," Melissa Lambarena, credit cards expert at NerdWallet, told Newsweek.

"Rising prices have led some consumers to rely on their credit cards to make ends meet. We're now at a point where credit card debt is at an all time high, and the elevated cost of interest rates has only added to their debt burden."

According to the survey, conducted on May 31 among a sample population of 1,500 eligible voters in the U.S., an overwhelming majority of Americans—81 percent—have at least one credit card, while 19 percent have none to their own name.

Among the ones owning a credit card, 33 percent used it a few times a week, 12 percent multiple times a day, once a day, and a few times a month, while 5 percent and 8 percent used it once a month and less than once a month, respectively.

Some 23 percent of Americans aged 18-24 used their credit cards "a few times a week," while 33 percent of those aged 25-34, 42 percent of those aged 35-44, 31 percent of those aged 45-54 and 55-64, and 33 percent of those aged 65 and above did so. The age cohort that used their credit cards the most—"multiple times a day"—was the 35-44 one, with 19 percent. Some 25 percent of respondents aged 18-24 used their credit cards "once a day."

According to Lambarena, some consumers are relying on their credit cards for essential purchases like gas or food. "Credit card rewards are also an avenue tapped by some consumers to cover essential costs," she said.

The increased importance of credit cards during uncertain economic times is clear by the amount of debt Americans have accumulated to this day. According to the Federal Reserve Bank of New York's latest data released last month, Americans are holding a record amount of credit card debt, around $986 billion. That's a 17 percent jump compared to a year ago.

Among the respondents to the Newsweek/Redfield & Wilton Strategies survey owning at least a credit card, 42 percent have less than $1,000 in debt on their credit card, while 30 percent have between $1,000 and $5,000. Some 22 percent of respondents aged 22-34 and 21 percent of those aged 35-44 have debt over $10,000. Some 26 percent of those aged 18-24 had debt between $,1,000 and $5,000.

The younger age cohorts were the most worried about not being able to repay their credit card debt, with 44 percent of those aged 18-24, 51 percent of those aged 25-34, and 46 percent of those aged 35-44 saying they were "very concerned." Only 15 percent of those aged 45-54 and 13 percent of those aged 55-64 were as concerned, while the number went up to 26 percent for those aged 65 and above. Some 43 percent of respondents aged 55-64 were not at all concerned about repaying their debt.

A majority of all respondents, 59 percent, said they pay off their credit card debt in full every month, with 64 percent saying they would be able to pay off their entire credit card debt with their savings if they suddenly decided to do so "right now." Some 31 percent said they wouldn't be able to do the same, with 50 percent of those aged 45-54 and 43 percent of those aged 55-64 saying they couldn't.

"These days, it's harder for consumers to see the finish line at the end of their debt journey," Lambarena said. Nearly one in five Americans say it will take them longer than planned to pay off their existing overall debt because of rising interest rates, according to a 2023 Consumer Credit Card Report by NerdWallet.

"A prolonged debt journey can also impact other financial goals. It could mean delaying savings, a much-needed vacation or a large purchase," Lambarena said.

Deborah Owens, founder of WealthyU—a platform helping women to invest—told Newsweek that inflation has changed the way people approach their credit card debt.

"The high inflationary pressure has come down now, but it has reduced people's discretionary income and they are having to change their behavior," she said.

Owens, a former vice president at Fidelity Investments, just wrote a book, called Wealth Secrets, which shares the story of women who have just paid off "tremendous amounts of credit card debt."

Owens now has a Facebook group with 12,000 members, where people discuss how they use their credit card, so she's up to speed with the way everyday Americans feel about spending money.

She said that higher credit card interest rates are also playing a role in the larger total debt.

"People are a lot more discerning about how they use their credit cards, because they realize the interest that they're going to have to pay on those cards is a lot more," she said.

The average credit card interest rate recently rose to 20.92 percent, higher than at any point since the Federal Reserve began tracking annual percentage rates in 1994, according to a study from WalletHub.

As credit card debt increasingly worries a majority of Americans, many "are looking for credit counseling services," Maysam Rizvi, CEO of debt management platform Elifinty, told Newsweek. "They're looking for support, for some form of relief. They're going to the companies which can help them with debt consolidation or debt repayments."

Learn more: How To Get a Debt Consolidation Loan

For Rizvi, there's a bunch of solutions that could be put in place to protect Americans from ever-growing debt.

One solution could be debt forgiveness—like President Joe Biden's student loan debt plan, which has met the strong opposition of Republicans. Another solution, Rizvi suggested, is the introduction of interest-free loans.

"Australia, for example, has been running a similar program for a number of years now," Rizvi said. "After the financial crisis, they started seeing the same issues of wealth and what they did was the government gave release capital to banks in exchange for providing non-interest loans."

Banks are required to keep a certain level of capital against any lending that they do, Rizvi explained. So the Australian government provided capital relief to banks that offered non-interest loans "to the lower segment of society who are struggling."

Americans could also benefit from "payment holidays," Rizvi said—allowing credit card holders feeling the short-term pinch of their debt to take a break from repaying what they owe for an agreed period of time, while avoiding a drop of their credit scores.

"A number of people are feeling the short-term pinch and not necessarily the long-term pinch," he said. "And so the idea of this is to support the people who are feeling the short-term pinch, to stop them from falling into deeper problems."

Correction, 8/15/23 10:00 a.m. ET: The article initially described Deborah Owens as the founder of "America's Wealth Coach" but was corrected to describe her as the founder of "WealthyU."