David C. Wicker, a 31-year-old San Diego resident who works in casino surveillance management, got his first credit card at the age of 18 while he was shopping for college dorm supplies at
It wasn’t until later in college though that his credit-card debt began to grow after he decided to take out less in student loans and started paying for more of his living expenses with credit cards.
“This is about the time I began having recurring month-to-month credit card totals and never fully recovered,” Wicker said.
He’s not alone. While the percentage of adults who are carrying credit-card debt for at least two years has shrunk from 43% in 2017, new research released Thursday shows the actual number has grown by 10 million people.
After graduation, Wicker found himself working in retail while trying to get a job as a police officer. Saddled with student loans, he turned to credit cards to pay for his rent, groceries, gas and other necessities.
“After about six months of this, I had maxed out one of my credit cards at $2,400 and could not pay the monthly obligations to my loans and credit cards,” he said. He’s one of millions of Americans who rely on credit cards for everyday expenses.
Americans’ love affair with credit cards is beginning to have longer-term consequences. Around six in 10 credit card holders (59%) are currently carrying a balance on at least one card, according to a new report from CreditCards.com.
For many of these consumers, this is not a new development.
Here’s what it found:
• Around 37% of credit card holders — some 39 million Americans — have been in debt for at least two years.
• Another 56% of respondents report being in debt for at least a year, while nearly one quarter (23%) have held their debt for at least three years.
• Even more concerning: Some people don’t even know how much debt they have: 7% of credit-card holders cannot recall how long they have carried a balance.
These findings were based on a survey of more than 2,500 adults that was commissioned by CreditCards.com and conducted by polling firm YouGov.
Why Americans are stuck with credit-card debt
Emergencies are a major driver behind this trend, which is not surprising given that nearly one-third of Americans have more credit-card debt than they do emergency savings, a figure that has grown over the years.
More than 1 in 3 consumers with credit-card debt attributed it to emergencies, including car repairs (14%), medical bills (12%) and home repairs (9%).
But 28% of consumers who have been carrying credit-card debt said day-to-day expenses such as groceries or utilities were to blame. A smaller share of people (27%) said their debt stemmed from discretionary spending.
Wicker’s story is not uncommon. He went into default on his student loans. One of his cards was closed by the issuing bank, causing his credit score to suffer. It only recovered when he changed careers.
Of course, to improve his credit history, he turned to credit-repair cards. A better credit score enabled him to take on more debt — in this case to buy an engagement ring and help pay for the wedding to his now-wife.
“As life continued, the gracious 12 to 18 months of free interest periods on these cards began to come due, so we began to play the balance transfer game, moving the balances from one card to the next, to the next,” he told MarketWatch.
How to approach paying off credit-card debt
As Wicker learned, simply taking on debt without a concrete idea of how to repay it is a recipe for trouble. “Life happens fast and sometimes a credit card is necessary,” he said.
“You must be ever aware of how much debt you are actually accruing and have a plan for paying it off, not simply approaching it with the ‘I’ll deal with it later’ mind-set,” Wicker added.
Here are some tips from personal-finance experts on how to repay debt:
• Watch out for interest rates: Credit-card rates are at an all-time high right now. Certain cards, especially retail store cards, will generally have higher interest rates than others. Many experts suggest paying off cards with higher rates first in order to avoid bigger interest payments.
• Consider a snowball approach: Alternatively, some advisers prefer paying off debt in order based on the amount, and not the interest rate. In this case, borrowers would make minimum payments on all their cards, but otherwise pay off the cards will the smallest balances first. This can reward consumers psychologically and make debt repayment feel more manageable.
• Keep limited-time offers in mind: Consumers struggling with credit-card debt could benefit from transferring that debt to a balance-transfer card. Many card issuers are offering 0% interest for a limited time to attract consumers. But beware: If the debt isn’t paid off within a certain period of time, the borrower will begin to owe interest again, potentially at a higher rate than their original card. Opening new lines of credit too quickly can lower one’s credit score.
• Plan for further emergencies: Wicker and his wife’s efforts to pay off their debt were further stymied by needing to pay for dental work. Luckily, career advancements and savings allowed the couple to pay off Wicker’s debt completely this February, over a decade after he opened his first card.
Wicker’s wife plans to pay off her remaining credit-card debt by September. “We will be a couple that is credit-card debt free for the first time in our relationship,” he said. “I honestly could never have been debt-free if it wasn’t for my wife pushing us to live within our means and not simply indulge because we have the spending power to do so.”