Young credit card users face lifelong debt

A new study says people in their 20s and 30s carry more debt than their parents and grandparents did, and are paying off their balances more slowly.

By Bruce Kennedy Jan 16, 2013 9:08AM

Image: Credit card (Hill Street Studios/Getty Images/Getty Images)Here's some sobering news for people in their 20s and 30s, still relatively new to the workforce and thinking about all those goodies a steady salary will allow you to buy.

A new study says your generation is not only taking on more debt than previous generations, but that you may also spend the rest of your life in debt.

The Ohio State University study suggests people born between 1980 and 1984 have much higher credit card debt – on average nearly $5,700 higher -- than their parent’s generation of people born in 1950 to 1954. And compared to what would be their grandparent’s generation, born 1920 to 1924, those 20 and 30-somethings reportedly average over $8,100 more in debt.

The study also estimates that younger people are paying off their debt more slowly than either their parents or grandparents; at payoff rates that are 24% and 77% lower, respectively.

 “If what we found continues to hold true, we may have more elderly people with substantial financial problems in the future,” said OSU economics professor Lucia Dunn, the study’s co-author.

“Our projections are that the typical credit card holder among younger Americans who keeps a balance will die still in debt to credit card companies.”

Dunn believes her study gives a more complete picture of credit card behavior, since most of the current data available to researchers only deals with borrowing habits – and not about the paying off  of that credit card debt.

Most credit card data shows that debt increases with younger consumers, peaks in middle age and tapers off with the elderly.

But Dunn says that data can be misleading, because it doesn’t factor in how different generations of Americans approach credit card debt.  Part of the issue, she notes, is that credit is much more readily available to consumers now than in the past. 

“There have been changes in interest rates and less stigma attached to having credit card debt,” she says, “which may all make younger people today more willing to go into debt.”

One silver lining in the study is that higher minimum credit card payments often lead to credit card holders paying off more than the minimum. 

“Raising the minimum payoff rate can have a powerful effect on how people actually pay off their credit card debt, much more so than you might expect,” Dunn said.

More on Money Now

Feb 16, 2013 9:50AM

People who try to live beyond their means end up living beneath their means.  Credit card interest is a killer.


At typical credit card interest rates, if you buy "stuff" on credit and carry the balance for 5-8 years, you will have paid enough interest to have bought the stuff with cash.  You will be behind all the rest of your life.  You will pay for that "stuff" over and over and over.


With the possible exception of your first car, don't EVER pay interest on anything except a home mortgage.  And if you're paying interest on that first car, make sure it's a cheap one from a used car lot.


Any other course will force you to live beneath your means all the rest of your life.

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