February 13, 2023

Personal finance company NerdWallet did a study on American household debt and credit card use. The results are a bit somber. For 2022, NerdWallet found the average American household has outstanding debt of $165,388. That’s up 7.65% from 2021 and a new record high.

Additionally, household debt grew significantly last year, highlighted by credit card balances totaling $460 billion. Mortgages, auto loans, and overall debt have also increased.

Unfortunately, this trend isn’t new. While the median household income grew 7% since the start of 2020, costs of living have increased 16% over the same time. Here’s a breakdown:

All in all, household income grew 4% while the cost of living grew 8%. Americans are losing ground. These figures make it no surprise that nearly 70% of Americans surveyed in the study have financial concerns about the next year.

Credit card debt is typically associated with frivolous expenditures. But higher prices and interest rates are squeezing paychecks, even as income rises. So, Americans are using credit cards to pay for everyday living expenses.

This is a scary pattern. If it continues over time, many people are going to be in real financial trouble. Hopefully, this scenario is an exception and people will get things in order in due time. But I’m not sure that will happen because debt can be a nasty downward spiral.