2020 American Household Credit Card Debt Study
Average household income is up and credit card debt is down — but as with everything else in 2020, there’s more to the story. Digging deeper, our survey finds some Americans are doing better financially but many more aren’t.
By Erin El Issa
Jan. 12, 2021
After a year of uncertainty and financial turmoil for many Americans, it may be surprising that data shows credit card balances falling in 2020 and average household income rising. But a closer look reveals higher overall household debt and income losses for millions of people across the nation.
Credit card debt balances carried from month to month in 2020 dropped by more than 6%, falling to $416 billion as of September.  But other types of debt, including mortgages, auto loans and student loans, increased from 2019 to 2020.
Here’s the breakdown of what U.S. households owed, both in total and the average amount per household with each kind of debt, as of September :
|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 2019 and 2020|
|* 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. **The credit card debt figures in this chart represent revolving credit card balances — those that are carried from month to month — rather than all credit card balances. Total U.S. credit card outstanding debt stands at $915 billion as of September 2020, which includes both revolving and transacting balances.|
|Any type of debt*||$145,085||$14.35 trillion||2.85%|
|Credit cards (revolving)**||$7,027||$416.13 billion||–6.34%|
|Auto loans||$27,852||$1.36 trillion||3.42%|
|Student loans||$56,572||$1.55 trillion||3.47%|
To get a better look at the pandemic’s impact on Americans’ finances, NerdWallet commissioned an online survey of more than 2,000 U.S. adults conducted by The Harris Poll. The survey reveals stark differences, with some Americans benefiting from higher incomes, lower expenses and falling interest rates while others were devastated this year by income and job losses.
“For many Americans, 2020 has been a year full of uncertainty,” says Sara Rathner, credit cards expert at NerdWallet. “There’s hope for next year, thanks to positive vaccine news, but it’ll take time for some Americans to bounce back from months of financial instability.”
- Income has been growing faster than the cost of living, but the pandemic has upended everything. Over the past decade, average median income has grown 41% , outpacing the rise in the cost of living over that same time frame. But 2020 was a nightmare for many Americans: Of those who say their household financial situation has gotten worse since the pandemic began, 63% say they feel it has worsened because they lost their job or their household income decreased overall, according to our survey.
- Some Americans are doing better, but many more are doing worse. About 1 in 7 Americans (14%) say their household financial situation has gotten better since the onset of the pandemic. But three times as many (42%) say their household financial situation has gotten worse, the survey found.
- Americans with worsening finances have tapped savings and added more debt. Of those who say their household financial situation has gotten worse since the pandemic began, 45% say they’ve taken on debt because of it. The same proportion, 45%, say they took money from savings to pay for bills and necessities in response to their worsening finances, according to the survey.
- Despite lower interest rates, debt costs add up. U.S. households that carry credit card debt will pay interest charges of $1,155 on average this year.  Self-employed Americans will pay an average of $1,539 in annual credit card interest. 
Income has outpaced the cost of living, but by how much?
Over the past decade, the 10 years immediately following the Great Recession, the cost of living has increased 19% while median household income has soared 41%, according to government data.  This suggests that some consumers came into 2020 with breathing room in their budgets, but the pandemic’s pervasive impact provides important context to understand these numbers.
The chart above shows a huge jump in household income by the end of 2019, but that increase is very likely overstated because of the challenges of collecting data during the pandemic. Data on average annual household income comes from the U.S. Census Bureau, which collected the 2019 numbers from surveys conducted in 2020. But surveys are being affected by a nonresponse bias more strongly associated with income than in the past, according to the Census Bureau. Simply put, changes to survey practices necessitated by the pandemic — including the suspension of in-person interviews — means that people who were struggling financially were more likely to be missed. As a result, 2019 income was overstated and poverty rates are understated.
The Census Bureau estimates that median household income in 2019 is actually 2.8% lower than reported, although the reported figure remains the “official” government number. We’re using the reported number for year-over-year consistency.
Our survey found widespread job and income losses associated with the pandemic. More than 2 in 5 Americans (42%) say their household financial situation has gotten worse since the onset of the pandemic. Among those people, more than 3 in 5 (63%) say they feel their household finances have worsened because they lost their job or their household income decreased overall during this time.
Average household income gives a general idea of how U.S. households are doing financially, but averages can be skewed by income inequality, which has been exacerbated by the pandemic. Big gains at the top can mask the struggles at the lower end of the scale. Our survey shows that some Americans have experienced improved finances since the pandemic began, but their numbers pale in comparison with those reporting a worse situation.
In times like these, money rules go out the window… Keeping the lights on and the refrigerator full is the most important thing. Everything else can wait for later.Sara Rathner, NerdWallet's Credit Card Expert
Some doing better, but more struggling financially due to COVID
In talking about debt in 2020, it’s impossible to ignore how COVID-19 has affected Americans’ finances. When asked if their household financial situation had gotten better or worse since the onset of the pandemic, 14% of U.S. adults in the survey reported “better,” 42% say “worse” and 43% said their household finances stayed the same.
Of those Americans who say their household financial situation has gotten worse since the pandemic began, 51% say it’s because their household income decreased overall, 30% say it’s because they had an unexpected large expense and 22% attribute it to them losing their job, according to the survey.
Parents of children younger than 18, Latinos and Americans with household incomes of less than $50,000 have been hit particularly hard. Close to half of parents of minor children (48%) say their household financial situation has gotten worse since the onset of the pandemic (vs. 39% of those who aren’t parents of minors); of those people, more than 7 in 10 (71%) say it’s because their household income has decreased overall or they’ve lost their job.
In the survey, Latinos are more likely to say their household financial situation has gotten worse than Black and white Americans (56%, versus 42% and 40%, respectively). More than a quarter (27%) of Americans with household incomes under $50,000 say their household financial situation has gotten “much worse” since the onset of the pandemic (vs. 12% with household incomes of $100,000 or more).
To cope, some Americans have taken on debt (45%) — credit card, medical or otherwise — or withdrawn money from savings to pay for bills/necessities (45%), the survey found.
What struggling Americans can do: Know the resources available and break financial rules
The pandemic’s financial impact has been brutal for many, and people are trying to make do with the options they have. If you aren’t sure what resources are available, we have a guide on managing your finances during tough times, including information on dealing with job loss, the best options for borrowing money and refinancing a mortgage with a lower credit score.
Also, this isn’t the time to worry about making the “best” money moves. In an emergency — and a pandemic that slashes your income is an emergency — your goal should be getting through it, regardless of whether you’re following financial best practices to the letter. So if you need to carry a balance on your credit card, for example, or just make the minimum payment in order to preserve cash, do it. If you have to pause retirement savings or go into debt to afford necessities, that’s understandable. The safety and well-being of you and your loved ones is more important than optimal finances.
“In times like these, money rules go out the window,” Rathner says. “Forget about building your credit or adhering to best practices. Keeping the lights on and the refrigerator full is the most important thing. Everything else can wait for later.”
Americans doing better point to increased income, decreased costs
The proportion of Americans who say their household finances have improved since the pandemic began (14%) is considerably smaller than those who have seen things get worse (42%). Among those who feel their household financial situation has gotten better, 38% say it’s because their household income increased overall, and 26% say it’s because their household expenses decreased overall, according to the survey.
There may be other reasons why some Americans saw their financial situation improve. Stimulus checks from the federal government were based on income, not need, and some Americans used the money to save, invest or pay down debt, according to a NerdWallet survey in May. That may have played a role in the drop in credit card debt from 2019 to 2020.
Additionally, the weekly federal unemployment benefit of $600 — which was enacted as part of the coronavirus relief package in March 2020 and expired in July — on top of state benefits helped prop up incomes to a greater degree than standard jobless aid. These measures helped some households avoid dire financial straits.
If you’ve had the good fortune of a financially stable year, there are many ways you can help others in your community, like donating to local causes or shopping at small businesses.Sara Rathner, NerdWallet's Credit Card Expert
Expenses changed as well for most Americans. According to the May survey, more than 3 in 5 Americans said they were spending less on shopping (63%), restaurant food (62%) and transportation (62%). For those who aren’t experiencing a drop in income along with lower spending, they may have extra money in their budget to allocate toward financial goals.
Most Americans who report that their household financial situation has gotten better since the onset of the pandemic (83%) say they’ve had extra money in their budget. Close to a quarter of Americans with improved household finances (24%) say they’ve used the extra money to pay off/down credit card debt and 26% say they invested it for retirement, according to the survey.
What Americans with improved finances can do: Save, pay off debt and help others if you can
Whether the pandemic has cut your travel expenses or you’ve had lower interest rates or deferred payments, it’s a smart idea to shore up extra cash in good times so you’re prepared for less prosperous times. This means having money set aside for emergencies, paying down high-interest debt and putting money away for the future.
If you’re in a strong place financially and have already done these things, this is also a good time to help those who are struggling.
“If you’ve had the good fortune of a financially stable year, there are many ways you can help others in your community, like donating to local causes or shopping at small businesses,” Rathner says. “Consider earmarking any cash back you earn on your credit card toward charitable donations.”
Credit card interest adds up
Earlier this year, some credit card issuers provided pandemic hardship relief, including reduced or waived interest payments. But this relief was short-lived, and interest continues to be a sizable expense for Americans who carry credit card debt from month to month. As of August, the average annual percentage rate on credit card accounts accruing interest was 16.43%. For the average household carrying a credit card balance as of September 2020, this means paying annual interest of $1,155. 
Many small businesses have struggled this year due to pandemic restrictions and tightened budgets, and people operating these businesses tend to have higher credit card balances than those working for someone else. U.S. households headed by self-employed Americans carry more credit card debt, on average, and have higher annual interest costs — $1,539 per year compared with $1,045 for households headed by someone else’s employee. 
…be kind to yourself and everyone you encounter. Millions of Americans are right there with you in the trenches. The best gift we can give each other is empathy.Sara Rathner, NerdWallet's Credit Card Expert
What cardholders can do: Take steps to reduce debt, if possible
Credit card debt is among the most expensive forms of debt, so the best thing you can do is reduce the amount you owe and therefore interest costs. Balance transfer credit cards have gotten more difficult to get, but if you have good credit — a score of at least 690 — it may be an option to transfer credit card balances to a card that won’t accrue interest for 12 months or more.
Other options to reduce interest costs are making multiple payments per month — this lowers the average daily balance on which interest is calculated — and cutting expenses to allocate more money toward debt payments. You may also qualify for a personal loan with a lower interest rate than you’re currently paying.
2020 was a hard year for many, financially and otherwise. If it’s not possible to prioritize paying off credit card debt right now, that’s OK.
“You don’t need to struggle alone. For now, continue to reach out to your credit card companies, lenders and landlords. See what help is available that can get you through the next few months,” Rathner says. “Most importantly, be kind to yourself and everyone you encounter. Millions of Americans are right there with you in the trenches. The best gift we can give each other is empathy.”
This survey of 2,075 U.S. adults ages 18 and older was conducted online in the U.S. by The Harris Poll on behalf of NerdWallet from Nov. 17-19, 2020. This survey isn’t based on a probability sample so no estimate of theoretical sampling error can be calculated. For complete survey methodology, including weighting variables and subgroup sample sizes, contact Brittany Benson at [email protected].
NerdWallet’s analysis includes data from the following sources:
- Household Debt and Credit, September 2020, from the Federal Reserve Bank of New York’s Center for Microeconomic Data.
- Families and Households, December 2019, from the U.S. Census Bureau.
- 2019 Survey of Consumer Finances from the Board of Governors of the Federal Reserve System.
- Revolving and transacting bank-card balances, June 2020, via email from Experian, one of the major credit reporting agencies in the U.S.
- Consumer Price Index, September 2020, from the U.S. Bureau of Labor Statistics.
- Historical Income Tables: Households, September 2020, from the U.S. Census Bureau.
- Employment Cost Index Historical Listing – Volume IV, October 2020, from the Bureau of Labor Statistics’ National Compensation Survey.
- Commercial Bank Interest Rate on Credit Card Plans, Accounts Assessed Interest, August 2020, from the Federal Reserve Bank of St. Louis.
 Revolving credit card debt is calculated differently from other types of household debt. The Federal Reserve Bank of New York uses credit reporting data from Equifax, one of the major credit reporting agencies in the U.S., as the source of its credit card debt data and includes both revolving balances (debt carried from month to month) and transacting balances (debt that will be paid off at the next statement). We estimated the amount of revolving debt by using data from the credit bureau Experian to determine balances that were revolved and transacted on bank credit cards. 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. — $915 billion as of September 2020 — by the percentage of revolving debt. (According to the New York Fed, the nation’s households had outstanding credit card balances of $810 billion as of September 2020, 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 $810 billion and added it to 25% of reported “other” debt; the Federal Reserve Bank of New York 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 (using 2020 estimates based on 2019 U.S. Census data), by the percentage of households holding that debt (using 2020 estimates based on 2019 data from the Federal Reserve’s Survey of Consumer Finances).
 To calculate household debt for each debt category — with the exception of 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, using 2020 projections based on 2019 U.S. Census Bureau data, by the percentage of households holding that debt, based on data from the 2019 Survey of Consumer Finances.
 Consumer price indexes 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 218.275 to 260.209 from September 2010 to September 2020. To compare the increase in the price index categories with income growth since 2010, we projected a 2020 median household income using the 2019 median reported income of $68,703 and increasing it by the quarterly percent changes reported in the Bureau of Labor Statistics’ Employment Cost Index data for civilian workers. This is a change in methodology that we will continue using for this annual study because it allows for greater precision than our previous method of estimating income growth, which was based on average annual growth over the previous decade. Based on census data, the median household income was $49,276 in 2010; our projections show a median household income of $69,252 for 2020.
 To determine credit card interest over the course of a year, we used our estimate of revolving credit card debt and data of the average interest rate on credit card accounts assessed interest from the Federal Reserve Bank of St. Louis from August 2020. 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.
 To estimate credit card interest over the course of a year for a self-employed head of household versus a head of household who works for someone else, we used demographic data about credit card debt from the 2019 Survey of Consumer Finances and scaled it up to our 2020 estimates for revolving credit card debt. We use the average interest rate on credit card accounts assessed interest from the Federal Reserve Bank of St. Louis from August 2020 and we don’t account for daily compounding or fluctuating balances.