NerdWallet's

2022 American Household Credit Card Debt Study

Credit card debt surges as Americans cope with the rising cost of living.

By Erin El Issa
Jan. 10, 2023

This past year has been an expensive one: The cost of living is rising faster than incomes, forcing many Americans to take on more debt to make ends meet. And interest rates that have increased in response to inflation are making debt more costly.

NerdWallet’s annual look at household debt finds that credit card balances carried from month to month have increased over the past 12 months, totaling an estimated $460 billion as of September 2022 [1]. Mortgages, auto loans and overall debt loads also increased over the past year, while student loan debt dropped slightly.

Here’s the breakdown of what U.S. households owed in total and the average amount per household with each type of debt, as of September 2022 [2]:

Type of debt Total owed by an average U.S. household with this debt Total owed in the U.S. Percentage change for total owed between 2021 and 2022
* This debt can include mortgages, home equity lines of credit, auto loans, credit cards, student loans and other household debt, according to the Federal Reserve Bank of New York. **Total U.S. credit card outstanding debt includes revolving and transacting balances. ***Revolving debt was calculated using the average of the past five years of percentage of credit card debt considered revolving (carried month to month) as opposed to transacting (paid in full each month). In the past, we've received these numbers from Experian. The credit bureau declined to provide the revolving vs. transacting data for 2022.
Any type of debt* $165,388 $16.51 trillion +7.65%
Credit cards (total)** $17,066 $1.05 trillion +15.17%
Credit cards (revolving) $7,486 $459.6 billion +28.73%***
Mortgages $222,592 $11.67 trillion +8.54%
Auto loans $28,975 $1.52 trillion +5.31%
Student loans $58,238 $1.57 trillion -0.64%
The nearly 30% increase in revolving credit card debt — that is, credit card balances carried from month to month — can be attributed to two things: a significant increase in total credit card debt (revolving and nonrevolving) and a higher estimated proportion of revolving debt. Total credit card debt rose by 15%. With the cost of living outpacing income growth, it stands to reason that a greater share of that increase came in the form of revolving debt. This is only an estimate; we calculated it using the average percentage of revolving debt from the previous five years. This figure is higher than the historically low revolving debt percentage of 2021 but is in line with percentages in the years before the COVID-19 pandemic.

 

Our annual study analyzes government data — from such sources as the U.S. Bureau of Labor Statistics and the Federal Reserve Bank of New York — to see how household debt has changed over the past year. NerdWallet also recently commissioned an online survey of more than 2,000 U.S. adults, conducted by The Harris Poll, to learn more about how Americans feel about their debt and how they think future interest rate increases will affect their finances. We also asked about Americans’ usage of “buy now, pay later” services, how their income has (or hasn’t) kept up with inflation, and their financial concerns for the year to come.

Key findings

  • Prices are rising faster than incomes. In the past year, median household income has grown just 4%, while the overall cost of living has jumped 8% [3]. The survey found that nearly half of employed Americans (45%) say their pay hasn’t increased enough over the past 12 months to keep up with inflation.
  • Buy now, pay later services may mean deeper debt for millions. Close to 1 in 5 Americans (18%) say they have used a BNPL service in the past 12 months.
  • Consumers are anxious about finances over the next year. Nearly 7 in 10 Americans (69%) have financial concerns about the next 12 months. The No. 1 worry is having to go into debt/more debt to cover necessities (31%), followed by having to pay higher interest on their debt (27%).
  • The average amount of credit card interest paid by households is up due to recent Federal Reserve rate hikes and rising amounts of revolving credit card debt. U.S. households that carry credit card debt will pay an average of $1,380 in interest this year [4]. And that’s assuming interest rates don’t go higher.

“Credit card debt is often thought to be the result of frivolous spending, but for many Americans, that’s just not true,” says Sara Rathner, a NerdWallet credit cards expert. “Consumers are feeling the squeeze of higher prices and interest rates, and paychecks just aren’t keeping up. That’s forcing many to make tough decisions, like going into debt to pay for necessities.”

Cost of living outpaces income growth significantly over past year

Each year, we look at growth in the cost of living compared with that of household income over the preceding decade to determine whether income is keeping up with expenses. When using that 10-year time frame, we found income is keeping up: Median household income has grown by 44% since 2012, while overall expenses have increased by 28% in the same span [5]. But the story changes radically when you look at short-term growth, due to the COVID-19 pandemic and unusually high inflation.

Looking at growth over the last three years — pre-pandemic to now — median income has grown by 7%, but overall costs have increased by nearly 16% [6]. This includes a 27% increase in transportation costs, a 20% increase for food and beverage costs and a 14% increase in housing costs. And that may partly explain why, according to our survey, 45% of Americans say their overall financial health is worse now compared with before the COVID-19 pandemic.

In the survey, nearly half of employed Americans (45%) say their pay hasn’t increased enough over the past 12 months to keep up with inflation. The consumer price index and income growth data backs this up. Over the past year, we’ve seen prices soar — 8.2% annual inflation, as of September 2022. This includes a 13% increase in transportation costs, 11% in food and beverage costs and 8% in housing costs. Meanwhile, median household income has grown only 4% during this time [3].

Consumers are doing what they can to combat higher prices. According to the survey, nearly 4 in 5 Americans (79%) say they have taken action in response to inflation over the past six months: 42% of Americans say they’ve driven less, and 39% say they’ve bought more store brands and unprocessed staples. Close to 1 in 5 Americans (19%) say they’ve taken on more debt in response to inflation over the past six months.

Checking your recent spending for places to cut back and applying any extra funds to savings or debt repayment can be a big help.

Sara Rathner, NerdWallet Credit Cards Expert

Debt making Americans feel anxious, overwhelmed

Over the past year, nearly 3 in 10 Americans (28%) say their overall debt has increased, with 14% of Americans saying they’ve taken on medical debt during this time. And this debt is likely taking a toll.

According to the survey, 41% of Americans who currently have debt feel anxious about it, and 35% feel overwhelmed. This feeling of being overwhelmed is more prevalent among Americans with annual household incomes under $75,000 who currently have debt: 44% of this group feels this way, compared with 27% of indebted Americans with annual household incomes of $75,000 or more.

BNPL may be hiding additional debt

Our annual household debt analysis looks at traditional debt types — such as credit cards, mortgages and student loans. Robust data about such debts is collected and reported by government sources like the Federal Reserve Bank of New York. But the debt problem may go deeper because of the proliferation of short-term loans made by buy now, pay later services, such as Affirm and Klarna. BNPL services allow you to buy something now and then make payments in installments — often 25% at the time of purchase and 25% every two weeks until paid off. Longer-term BNPL options usually charge interest, like a traditional installment loan.

According to our survey, nearly 1 in 5 Americans (18%) have used a BNPL service in the past 12 months. This situation is more prevalent among younger Americans: 25% of Gen Zers (ages 18-25) and 30% of millennials (ages 26-41) have used these services in the past year, compared with 16% of Gen Xers (ages 42-57) and 7% of baby boomers (ages 58-76).

Some Americans rely on BNPL services to pay for everyday necessities — things that are used up before they’re even paid for. According to a September 2022 report by the Consumer Financial Protection Bureau, or CFPB, usage for everyday or necessity purchases — like gas, groceries and utilities — was up 434% between 2020 and 2021 and up 1,207% between 2019 and 2020.

BNPL services are often interest-free, but they may charge late fees for those who miss payments. The CFPB report found that 10.5% of BNPL borrowers were charged at least one late fee in 2021. And while late fees tend to be small — around $7 on an average loan balance of $135 — the report highlights possible downsides of these services that could become financially unhealthy, like overextension, or taking on more loans than you can reasonably handle.

For consumers who use BNPL once in a while, overextension probably won’t be an issue. But for those who stack loans — taking on several loans in a short period of time — and are frequent BNPL users, these payment obligations could affect their ability to pay other bills on time because of the amount of BNPL payments they have due. This could lead to late fees, interest charges and even damage to credit scores.

Many Americans bringing financial anxiety into the new year

The past year has been expensive, and many people aren’t optimistic things will improve in the next year. Nearly 7 in 10 Americans (69%) have financial concerns about the next 12 months, with a top concern being having to go into debt, or deeper in debt, to cover necessities (31%).

More than a quarter of Americans (27%) are concerned about having to pay higher interest on their debt over the next 12 months; this comes after a series of rate increases by the Federal Reserve and the possibility of more increases in 2023.

Credit card interest rates are up and may go higher

The Fed’s actions have pushed the average credit card interest rate on accounts incurring interest to 18.43% as of August 2022, according to the Federal Reserve Bank of St. Louis. This is the highest average rate since the St. Louis Fed began tracking this data in 1994. For American households carrying the average amount of revolving credit card debt, that would produce $1,380 in annual interest charges. Last year, average interest charges were $1,029 annually because of lower revolving credit card debt and lower interest rates.

During 2022, Americans saw seven rate increases from the Fed, and more could be coming in 2023. According to the survey, more than 3 in 5 Americans (61%) think future interest rate increases will affect their finances, whether for good or for ill. While 30% of Americans think it will make their current debt more expensive and 28% think it will make new debt they take on more expensive, 1 in 5 Americans (20%) think they’ll earn more interest on their savings.

What Americans can do

Take steps to prepare for a potential recession. As of now, a recession hasn’t been officially declared, but some experts predict that we’re in one or will be soon. Even if you know one is coming, though, it can be impossible to know what to expect because the effects of a recession are neither uniform nor universal, and uncertainty can quickly turn to calamity. The past few years have provided plenty of evidence about the importance of preparing for the unexpected, and there are ways to prepare yourself for a recession to limit the impact to your financial health.

You can’t control the economy at large, but you can take even small steps to feel more financially secure right now.

Sara Rathner, NerdWallet Credit Cards Expert

If you’re in a position to do so, add money to your savings consistently. This could mean continuing to build an emergency fund of three to six months’ worth of expenses or even saving beyond that in the event of longer-term income loss. To free up more money to put toward savings, look at your budget and see where you can cut. You don’t have to reduce your spending forever, but in the short term, it can help you beef up your savings faster.

“If a few months’ worth of expenses is too much for you to be able to set aside right now, aim for a few hundred dollars in an emergency savings account,” NerdWallet’s Rathner says. “It can be enormously helpful when you’re faced with an unexpected cost.”

Pay now rather than later, if you can. Using a buy now, pay later service may be right for you, but before you use one, consider the alternatives. If you have the money to pay off the balance, putting the charge on a credit card can earn rewards and also protect your purchase in the event of a return or defective item. It can also be a good idea to save up for any nonessentials over the course of six weeks — the standard BNPL period — and then make the purchase. You may find you no longer care to buy the item once some time has passed.

If you choose to use BNPL services, set up automatic payments to avoid late fees and limit the amount of purchases you make in a short period of time to avoid getting overwhelmed.

Avoid big financial moves, if possible. With consumer concerns about higher interest rates, credit being harder to access, and decreased credit limits, you may want to hold off on taking on new credit obligations if you can. This may not be feasible for you, and that’s OK; sometimes we just can’t wait for the perfect time, particularly when experiencing financial distress. But if you can hold off on making major money moves, it’s probably a good idea to do so.

“This is a good time to focus on financial basics,” Rathner says. “Checking your recent spending for places to cut back and applying any extra funds to savings or debt repayment can be a big help.”

Understand how higher interest rates affect you. More than a fifth of Americans (21%) aren’t sure whether future interest rate increases will have an impact on their finances, according to the survey. But if you have variable-interest debt — such as credit cards or a home equity line of credit — or have money in a savings account, higher rates will probably affect you. The same goes for new debt with fixed rates, like a mortgage or auto loan.

Interest rate increases can make your debt more expensive, but they can also make your savings grow faster. If you have variable-rate debt, aim to make higher or more frequent payments to pay it down more quickly. Hold off on applying for large loans with fixed rates as well, if you can — higher rates make big purchases, like a home or car, vastly more expensive. If you have a savings account, check your interest rate. Rates have been incredibly low until recently, but now you can find high-yield savings accounts with annual percentage rates, or APRs, of 3% or higher.

“The possibility of economic uncertainty is always scary,” Rathner says. “You can’t control the economy at large, but you can take even small steps to feel more financially secure right now.”

Methodology

This survey was conducted online within the United States by The Harris Poll on behalf of NerdWallet from Oct. 25-27, 2022, among 2,041 U.S. adults 18 and older. The sampling precision of Harris online polls is measured by using a Bayesian credible interval. For this study, the sample data is accurate to within +/- 2.8 percentage points using a 95% confidence level. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact Lauren Nash at [email protected].

NerdWallet’s analysis includes data from the following sources:

[1] Revolving credit card debt is calculated differently from other types of household debt. The Federal Reserve Bank of New York uses data from Equifax, one of the three major credit reporting bureaus in the U.S., as the source of its credit card debt data and includes revolving balances (debt carried from month to month) and transacting balances (debt that will be paid off at the next statement). In the past, we’ve used data from the credit bureau Experian to determine the percentage of balances that were revolved and transacted on bank credit cards. Experian declined to provide this data for 2022, so we used the average of percentages from 2017 to 2021. Data about revolving balances on retail credit cards wasn’t available, so we assumed that cardholders revolved debt on retail credit cards and bank credit cards at the same rate. Then, we multiplied the total outstanding credit card balances in the U.S. — $1.05 trillion as of September 2022 — by the percentage of revolving debt. (According to the New York Fed, the nation’s households had outstanding credit card balances of $925 billion as of September 2022, which includes debt on bank credit cards but not retail credit cards. To make this number more representative of all credit card debt, we took the $925 billion and added it to 25% of reported “other” debt; the New York Fed says about a quarter of so-called other debt is outstanding retail credit card debt.) Finally, we divided this amount by the number of households carrying revolving credit card debt. We estimated the number of households by multiplying the total number of U.S. households, projected based on data released at the end of 2021, by the percentage of households holding that debt (using 2022 estimates based on 2019 data from the Federal Reserve’s Survey of Consumer Finances).

[2] To calculate household debt for each debt category — with the exception of revolving credit card debt — we took the average amount of each type of debt reported by the Federal Reserve Bank of New York and divided it by the number of households with that type of debt. We estimated the number of households by multiplying the total number of U.S. households, projected based on data released at the end of 2021, by the percentage of households holding that debt, based on data from the 2019 Survey of Consumer Finances.

[3] Consumer price indexes, or CPIs, measure changes in price for a set of consumer goods and services. The price indexes we surveyed include prices for apparel, education and communication, food and beverage, food at home, food away from home, housing, medical, other goods and services, recreation and transportation. According to the U.S. Bureau of Labor Statistics, the price index of all items grew from 274.214 to 296.761 between September 2021 and September 2022. Transportation CPI increased from 237.107 to 267.043, food and beverage CPI increased from 280.413 to 310.635 and housing CPI increased from 283.532 to 306.323 between September 2021 and September 2022. To compare the increase in the price index categories with income growth since 2012, we projected a 2022 median household income using the 2021 median reported income of $70,784 and increasing or decreasing it by the quarterly percent changes reported in the Bureau of Labor Statistics’ Employment Cost Index data for civilian workers. Based on census data, the median household income was $70,784 in 2021, and our projections show a median household income of $73,653 for 2022.

[4] To determine credit card interest over the course of a year, we used our estimate of revolving credit card debt and data on the average interest rate on credit card accounts assessed interest from the Federal Reserve Bank of St. Louis from August 2022. Assuming a constant balance, we multiplied the average revolving credit card debt among households with credit card debt by the average APR. This is just an estimate; for simplicity, our calculations don’t account for daily compounding or fluctuating balances.

[5] According to the U.S. Bureau of Labor Statistics, the price index of all items grew from 231.015 to 296.761 between September 2012 and September 2022. Based on census data, the median household income was $51,017 in 2012; our projections show a median household income of $73,653 for 2022.

[6] According to the U.S. Bureau of Labor Statistics, the price index of all items grew from 256.596 to 296.761 between September 2019 and September 2022. Transportation CPI increased from 209.896 to 267.043, food and beverage CPI increased from 258.59 to 310.635 and housing CPI increased from 267.555 to 306.323 between September 2019 and September 2022. Based on census data, the median household income was $68,703 in 2019; our projections show a median household income of $73,653 for 2022.