Which generation has the highest credit card balances?
While it is possible to avoid using the credit card, it is not always practical. If you’re on vacation and your car breaks down on the side of the road, you might just need a credit card to cover the repairs. And if you want to book a hotel room, a credit card can help you do that. The problem with credit cards is their revolving nature – you don’t have to pay off a card in full every month, and when you don’t, the balance rolls over to the next month with interest attached. And yet, credit cards are so readily available and convenient that it can be easy to overdo it.
All generations except Generation Alpha (children ages 0-10) carry credit card debt, but Generation X carries the most.
Here’s how Gen X compares to the other five generations:
Adults 41 to 75 years old occupy the top two places on this list. There are a few probable reasons.
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Generation of sandwiches
Gen Xers and Baby Boomers have often found themselves caring for aging parents and growing children at the same time. As these generations struggled to provide for the financial needs of the elderly and younger than them, wages are stagnant. According to the Economic Policy Institute (EPI), between 1979 and 2019, wages stopped tracking inflation. Over these 40 years, there has been consistent positive wage growth in only 10 of them. When costs rise faster than income, credit cards can become a way to buy basic necessities.
Fewer job opportunities
Millions of baby boomers who once earned good incomes without a college degree have been left out of work. That’s because 5.7 million Americans lost their manufacturing jobs in the first 10 years of the 2000s. It’s worse than the rate of job losses in manufacturing during the Great Depression. . This means that one in three workers in the manufacturing sector had to reinvent themselves and reinvent their careers as the sector shrank. Often, these well-paid workers found jobs that paid less and offered fewer benefits (including health care and time off).
Many Gen Xers started their careers around this time and quickly faced the fallout from the Great Recession when jobs were scarce. The kinds of jobs their parents once had effortlessly were no longer open to them and their career options seemed limited. Perhaps a credit card seemed to be the only answer for some who found themselves in such circumstances.
Thinking too optimistic
Just as being overly pessimistic can be bad for you, being overly optimistic about your financial future can lead to costly mistakes. Many Americans (and virtually all Baby Boomers) were raised believing that the sky was the limit, that anyone could become CEO or President of the United States. The message was, âIf you believe in yourself enough and work hard, the world is your oyster.
Americans are known to be optimistic, which can be a wonderful thing, provided it is tempered by reality. Studies show that American adults are naturally more optimistic than adults in affluent European countries. For some of us, going into debt presents no risk because either:
- Our financial situation is about to improve.
- The asset for which we are indebted will increase in value.
The truth is, it’s risky to take on any type of debt, including credit card debt, if you don’t have a surefire way to pay it off before interest starts to hang on. .
Debt elimination strategies
Whatever generation you belong to, it is possible to get out of debt. It might not be quick or easy, but it’s a goal worth pursuing. Let the inspiration be the extra money that goes into your bank account once the debt is paid off.
0% promotional rate credit card
Credit card companies frequently offer new customers a promotional rate of 0% APR for 12 to 18 months. Let’s say you owe $ 3,600 in credit card debt, and because you have a good credit score, you qualify for a 0% APR rate credit card with a promotional rate that lasts for 18 months. Once you’ve transferred the old debt to your new card, you can pay it off in full by making payments of $ 200 per month, without paying interest.
Let’s say you pay 17% interest on a balance of $ 3,600. Your monthly payment is $ 108 per month. At this rate, it will take 46 months to fully pay off the credit card and you will pay $ 1,306 in interest.
Now if you add an additional $ 50 to the monthly payment (for a total of $ 158), the credit card will be paid off in 28 months and you will pay $ 777 in interest.
If you can put an additional $ 50 on the bill each month (for a total of $ 208), you will have the card paid off in 20 months and you will pay $ 559 in interest. In other words, throwing an extra $ 100 on the credit card each month cuts the time it takes to pay off debt by 26 months and saves $ 747 in interest. That’s $ 747 that you can use to fund a Roth IRA or other investment vehicle.
Apply the money found
Anytime you “find” money through a raise, bonus, inheritance, or the sale of a valuable item – and you don’t need the money for the expenses of daily living – put the money on credit card debt.
No more debt to erase?
Of course, Americans have more than one type of debt. You might have a mortgage, car payment, personal loan, or any other type of debt you’d like to get rid of. Debt reduction strategies like these help you choose the repayment method that works best for you, your budget, and your lifestyle.
Even though Gen X is ahead of other generations (by a hair’s breadth) in their level of credit card debt, breaking free from unwanted financial obligations is something anyone can aspire to no matter when they were born. .