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Poll: Long-term credit card debt looms large in the face of coronavirus outbreak

59% of U.S. adults with credit cards already had debt when the pandemic hit

Summary

According to CreditCards.com’s annual long-term debt poll, more than half of Americans with credit cards (59%) – or 110 million people – entered the coronavirus pandemic carrying credit card debt.

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During this uncertain time, many Americans are carrying long-term debt – and worrying about it.

According to CreditCards.com’s annual long-term debt poll, more than half of Americans with credit cards (59%) – or 110 million people – entered the coronavirus pandemic carrying credit card debt.

And of those with credit card debt, 56% – or 61 million Americans – have been carrying it for more than a year, including 27 million (25%) who have held debt for at least three years in a row and 17 million (15%) who have done it for at least five years.

Another 7% can’t recall how long they’ve been in credit card debt.

Ted Rossman, industry expert at CreditCards.com, said it’s alarming that people haven’t been making progress paying down their credit card debt amid a 10-year economic expansion and the lowest unemployment rate in 50 years. And given the coronavirus pandemic’s effect on various industries, the good economic times are likely to end soon.

Credit card rates remain very high – around 17% for most cardholders – and Federal Reserve interest rate cuts won’t provide much relief.

“The coronavirus outbreak is unfortunate proof that circumstances can change in an instant,” Rossman said.

Many adults were already teetering on the financial edge, reliant on credit cards to pay for day-to-day bills and emergencies at the start of the COVID-19 outbreak.

Things like payment relief programs, a balance transfer credit card and even personal loan debt consolidation are all options right now and should be fully explored to save money and alleviate stress, according to Rossman.

“Credit card debtors need to take matters into their own hands,” he said. “Debtors who are facing financial hardships because of the pandemic should talk to their issuer immediately to see what types of relief programs are in place.”

“Make paying off your credit cards a priority, especially with recession odds rising,” Rossman warned.

Long-term credit card debt poll: major findings

Here are some other key results from our long-term credit card debt poll:

  • Gen Xers and millennials carry balances the most: At the onset of the pandemic, Gen Xers (ages 40-55) and millennials (ages 24-39) with credit cards were the biggest groups who carried a balance from month to month – 66% and 65%, respectively, compared to 57% of baby boomer (aged 56-74) cardholders.
  • People are stressed about their debt: Forty-nine percent of credit card debtors are stressed about their credit card debt, and 13% of that group said they’re “very” stressed about it. Millennials (60%) and Gen Xers (49%) are more stressed than boomers (43%) about carrying debt.
  • Here’s what people are charging: Overall, 35% of those with credit card debt cited medical bills (13%), car repairs (12%) or home maintenance (10%) as the primary reason. Twenty-six percent answered that it was from daily expenses (groceries, child care or utilities), 18% said discretionary spending such as retail purchases and 12% said vacations.
  • Kids, income and education factor in: Other groups who were more inclined to carry credit card debt were cardholders with children under 18 (71% versus 55% of non-parents), as well as those with lower incomes (less than $40,000) and education levels (some college or less).

The survey of 2,526 U.S. adults was conducted online between March 4-6, 2020. See survey methodology.

Age, income and debt influence whether you carry debt

Age, income and family status influence the likelihood that a consumer will accrue credit card debt and how that consumer will deal it, according to Michael Sullivan, personal finance consultant for Phoenix-based Take Charge America, a nonprofit credit counseling agency.

Older consumers have the benefit of experience and a lifetime of earning, and most seniors have experienced the trauma of credit card debt and learned to avoid it and to deal with it, Sullivan said.

“Although we still see some seniors with too much debt, it is a smaller number and they are usually able to point to a single incident, such as an illness or unexpected job loss, to explain the debt,” he added.

The youngest consumers seldom request assistance with credit card debt because they have had the least time to accrue the debt and they have the fewest obligations distracting them, according to Sullivan.

“They also lack the experience to understand the problem of credit card debt,” he noted.

Despite these differences, the coronavirus crisis will likely have debt implications for adults of all ages.

For example, not only are older people at high risk of getting sick from the coronavirus, they might lose a hefty chunk of their retirement money to medical bills.

And many younger people are at risk of losing their jobs – so many already have – and getting sick.

People often self-sabotage by making irrational credit decisions

Dr. Maggie Baker, psychologist, financial therapist and author of “Crazy About Money: How Our Emotions Confuse Our Money Choices and What To Do About It,” said people might wonder why, if credit card carriers are stressed about their debt, they don’t do something about it.

In a perfect world, Baker said, everyone would see the good sense to live within their means, only buy what they need (not what they want) and never get sick.

And most people have a little voice in the back of their heads that echoes the best business practice norm of running in the black, she said.

We now know from behavioral economics research that when it comes to money people make irrational decisions based on mood, immediate circumstances and half-true beliefs, Baker pointed out.

“If we all know what we should do but we don’t do it, we are generating the very stress we so wish to get rid of,” Baker said, “and that’s called self-sabotage – which works to undermine our self-esteem, our well-being and sometimes our physical health.”

Determine if your spending habits match your values

CreditCards.com’s survey reveals most of the expenditures that get us into debt are day-to-day expenses such as groceries, child care, utilities, clothing, electronics and medical bills.

And Baker questioned if these daily expenses express basic need – or want.

“In a majority of cases it is probably need because the monthly income is stretched thin and the overflow is put on the credit card,” Baker said.

As this happens, you can decide to keep putting the overflow on the credit card from month to month, or, say, “Wait a minute, this has gone on too long, I’ve got to do something different.”

If you’re stuck in debt, Baker suggests looking closely at what you value: family, education, entertainment and travel, for instance.

Next, she said, go through your expenses and see if your spending habits match your stated values.

“One couple I counseled did that and discovered they were spending 25% of their earned income on eating out, and it wasn’t even one of their highly stated values,” Baker said.

Debt is dangerous when negative surprises occur

And, Baker acknowledged, you might get hit with a negative surprise while carrying debt. For instance, thousands of Americans will likely suffer from the economic effects of the COVID-19 outbreak through job losses and medical expenses.

“It takes courage, vigilance, persistence and a strong desire for change to look honestly at our spending habits because we all tend to do what is convenient, easy and less painful in the moment,” she emphasized.

What to do if you’re struggling with credit card debt

Identifying your values with regard to money is critical, but for many of us, it’s a conversation for another day. Fortunately, consumers affected by the coronavirus outbreak have various resources they can to turn to now if they’re in need.

  • If you’ve been laid off, apply for unemployment – immediately.
  • Next, contact your card issuer and see if it is offering cardholders fee waivers or deferred payments or a way to avoid incurring more interest – many issuers are.
  • Also, remember to protect your credit score by ensuring that your issuer’s modifications — missing a payment or formal forbearance and disaster notations – won’t ding it.
  • If you can’t get customer service on the phone, go to your issuer’s website and contact it via online chat or email.

And last, hang on because you’ll likely get some relief via the trillion-dollar stimulus package recently signed into law. But be sure to use it wisely – whether that means buying essential items, replenishing your savings or paying down credit card debt.

Survey methodology

CreditCards.com commissioned YouGov Plc to conduct the survey. All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2,526 adults, including 1,855 adults with a personal credit card and 1,086 with credit card debt. The poll was conducted online from March 4-6, 2020.

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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