Who Carries a Credit Card, and Who Carries Credit Card Debt?

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.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Good post Gary. Useful information, well summarized.

    Also, those of us who have taken you to task when you appear to be talking up your affiliate links should give credit when you stress the importance being able to pay off balances monthly before playing the rewards card game, which you did here.

  2. “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.”

    Credit card debt is not cheap. Interest charges typically run from 19 to 29 per cent per annum and this is not factoring in the various and sundry penalties and service charges that get layered on. In some cases credit card debt can be easily transferred into personal loans secured by assets like vehicles or real estate. These loans carry more reasonable rates in the 7 to 12 per cent range depending on terms and credit rating. However it never occurs to some folks that this is an option.

    What makes credit cards so attractive is convenience. It takes no effort to find funds for the next purchase. Just put it on plastic. Somehow it is less painful to swipe a card than count out a stack of bills (does anyone do this anymore?) so the balances grow and we lose track of just how much we spend. Until the statement arrives.. and wow, I spent that much?

    The sad reality of credit cards is that people who pay the most interest (proportionate to income) are those who can least afford it. These are the people on low incomes, owning few assets and struggling with irregular employment or unexpected medical expenses. For the most part they lack the financial literacy and discipline to maintain their spending at sensible and manageable levels.

  3. @JDB: “What makes credit cards so attractive is convenience.” And the rewards. If some idiot politician banned rewards it would be more convenient to use debit cards (or cash).

    “The sad reality of credit cards is that people who pay the most interest (proportionate to income) are those who can least afford it.”

    Not so, That is the ‘sad reality’ of being poor. Credit cards are LESS usuarous than other forms of credit for the poor. Take them away, and the poor are worse off.

  4. @L3 Agreed. Being poor is sad. Also sad is the fact that poor people who don’t qualify for credit cards still have to pay the vendor CC charges that are baked into prices, since any vendor offering cash discounts will be violating their contracts with the CC companies.

    Don’t worry about idiot politicians killing points deals. They get more than their fair share of rewards points from expense account expenditures. Expenses paid by taxpayers.

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