Credit cards are now most common type of debt, Fed finds

More families have card balance than other forms of debt, including mortgages

Fred O. Williams
Senior Reporter
Expert on consumer credit laws and regulations.

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Households with credit card debt cut their average balance between 2013 and 2016 – but more of them admitted having card debt that they could not pay off every month.

Those are some of the findings of the Federal Reserve’s latest Survey of Consumer Finances, published Wednesday. The survey, conducted at three-year intervals, asks U.S. households about their debt, income and savings, providing a broad look at consumers’ financial picture.

“Credit card balances have become the form of debt most widely held by families, edging out debt secured by a primary residence,” the report said. Home mortgages had been the most common form of household debt recorded since 1998. The change comes amid a relative drop in homeownership, the report said, as well as more families taking on card debt.

There were 43.9 percent of households with a credit card balance, up from 38.1 percent in the previous survey in 2013.

Among the findings for households that had at least one credit card account:

  • Typical interest rates rose to 12.3 percent, from 11.9 percent
  • The average balance per household fell to $5,700, from $5,900.
  • The median, or typical balance also fell, to $2,300 from $2,400. The median is the midpoint where half the population has a lower balance and half are higher.
  • There were still 57.5 percent of families able to use their credit cards as a convenience, without carrying a balance. But the proportion was down from 64 percent of card-carrying households in 2013.

Households undercount card debt?
The data on families’ credit card debt comes with an asterisk, however. Studies by the Federal Reserve Bank of New York found that previous rounds of the Survey of Consumer Finances undercounted credit card debt.

Using data from credit reports, the NY Fed estimated household credit card debt in 2013 was $9,600, or about $3,900 more than the survey of households. In the survey, the individual family member being questioned was likely unaware of the total credit card debt taken on by all members of the household, the NY Fed economists concluded.

Debt burden eased on families
Overall, looking at the broad financial picture, debt burdens on families became lighter, the survey found. For families with debt, the median payment came to 14.7 percent of their income, down from 15.9 percent. The fraction who faced debt payments that were greater than 40 percent of their income fell to 7 percent, from 8.2 percent.

That improvement in the debt load came despite climbing education debt, which affected 43.3 percent of families, up from 38.8 percent, the survey said. The average education debt climbed to $33,300, from $30,700.

More households admitted having any debt – 77.1 percent versus 74.5 percent.

Impact of economic recovery
Consumer finances got some help from economic tailwinds. During the 2013-2016 period, economic growth averaged 2.2 percent a year, and the national unemployment rate fell from 7.5 percent to 5 percent.

“The improvements in economic activity along with rising house and corporate equity prices combined to support increases in average and median family net worth (wealth) between 2013 and 2016,” Fed economists wrote in their report, “after both measures remained stagnant between 2010 and 2013.”

But while incomes and wealth rose, families with top-tier incomes saw larger gains than others, causing the gap between rich and poor to widen, the report said.

In a separate look at credit card debt, a telephone survey commissioned by found that people with incomes above $50,000 a year were more likely to carry a balance than less affluent people. Thirty-eight percent of cardholders making $50,000 or more said they carry a balance, compared to just 24 percent of cardholders making less.

See related: Survey: Who is most likely to carry credit card debt?How much is the average card debt in America?

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Updated: 04-21-2019