New Federal Reserve data combined with data from Equifax tells us something about average Americans’ use of credit cards.
The older you are the more likely you are to have a credit card.
- About half of adults under 25 have a credit card
- About 70% of adults 25-54 have a credit card
- That rises to 78% for those 55-64
- And 87% of those 65 and older
The more you make the more likely you are to have a credit card.
- Only 42% of those making less than $25,000 a year have a credit card (I’m a little surprised it’s that high)
- 64% of those making $25,000 – $49,000 have a credit card
- It’s 84% for those earning $50,000 – $99,000
- And 91% for those making $100,000 or more (while I know some people are concerned with credit cards, or have high income but poor credit, I’m surprised that nearly 10% don’t have one)
The more educated you are the more likely you are to have a credit card.
- Only one third of adults with less than a high school diploma have a credit card
- Nearly two-thirds with a high school diploma have one, and 72% with ‘some college’
- 91% of college graduates have a credit card (I’d bet those that don’t skew younger)
These aren’t entirely independent variables, incomes can rise with age and also with education levels.
The average American also carries a credit card balance of over $4000, but this varies by age as well — starting low for those in their 20s, growing up through peak working years, and beginning to decline as retirement nears.
One thing about average levels of credit card debt though is that it’s often different people at different times holding the debt. Many Americans incur credit card debt and then pay it off. It’s people with lower incomes who more frequently need to revolve balances — carry a balance, pay it off, and then build up new balances.
This is unfortunate but credit cards do not create the need to borrow, they offer the cheapest source of funds for those who need to borrow. The next best alternative to access funds to fix a car to get to work or pay medical bills may be payday lending — and even payday lending has its merit which is that collectors don’t break bones the way loan sharks do.
Ultimately it’s important to focus on rewards cards only if you can meet two conditions,
- If you don’t pay off your bill in full each month, don’t pay attention to credit card rewards pay attention to your interest rate (and getting the card paid off as quickly as you can)
- And do not spend more money than you would otherwise spend because you’re using a credit card, or because you ‘need’ the spending to hit a bonus. On average people using credit cards do spend more than those using cash, though a number of factors influence that result.
Otherwise your borrowing costs (APR) are going to outweigh rewards in considering card options.