BOSTON—According to a recent report from the Federal Reserve Bank of Boston, most Americans who have a credit card are constantly carrying debt from one month to the next.
The report, Consumer Revolving Credit and Debt over the Life Cycle and Business Cycle, analyzed 5% of all U.S. credit report accounts from 2000 to 2014 to determine how Americans' relationship with credit cards changes over time.
“They found only 35% of credit cardholders aged 25 to 50 pay off their balances each month. The overwhelming majority carry a balance every month,” said Bill Hardekopf, CEO of LowCards.com. “For most Americans, this borrowing begins between the ages of 20 and 30. During this time, credit card limits increase about 450% and debt rises 300%.”
Even as Americans age, they still rely on their credits cards. The average 20-year-old is using more than half of their available credit, and 50-year-olds use about 40%, the study shows.
“Once cardholders do reach the age of 50, credit card borrowing tapers, but 45% of 70-year-olds carry a balance each month. Even the typical 80-year-old carries a $600 balance,” said Hardekopf.
The study concludes “the median person is always borrowing, although at the end of life she is not borrowing much.”
The study also shows most Americans are apt to charge more in good economic climates than recessions.
“The reason is that spending does not seem influenced by the economy. Instead, borrowing seems to be driven by credit limits,” said Hardekopf. “When banks offer consumers higher limits, they use it, and banks are always adjusting how much credit they give cardholders. From 2000 to 2008, the average credit card limit rose 40%, then decreased 40% in 2009, the most recent recession.”