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More Credit Card Debt Than Savings?


The Rising Trend of Credit Card Debt Among US Adults


This image shows the percent of credit card borrowing higher than total savings bankrate

A recent study conducted by Bankrate has highlighted an alarming trend in the financial habits of adults in the United States. Over the past few years, there has been a significant increase in the percentage of adults who have more credit card debt than total savings.

Here's a snapshot of the statistics:

  • 2021: 21% of US adults had more credit card debt than total savings

  • 2022: 27%, a 6% increase from the previous year

  • 2023: 36%, marking a substantial 9% increase from 2022

This continuous upward trajectory reflects not only the financial pressures many individuals may be facing but also the ease with which credit can be accessed. It underscores the need for effective financial education and responsible credit card usage.


The Cost of More Credit Card Debt Than Savings


The consequences of carrying more debt than savings can be severe, leading to potential credit score damage, higher interest costs, and a decreased ability to invest in future financial goals like retirement, education, or home ownership.


Let's look at an example of how credit card debt can grow over time with an 18% interest rate on a principal of $35,000.

This example will show the compounding effects of interest, without making any payments toward the debt.


Initial Debt: $35,000 Interest Rate: 18% annually

Year-by-Year Breakdown:

  • Year 1:

    • Interest for the year: $35,000 * 0.18 = $6,300

    • Total Debt: $35,000 + $6,300 = $41,300

Year 2:

  • Interest for the year: $41,300 * 0.18 = $7,434

  • Total Debt: $41,300 + $7,434 = $48,734

Year 3:

  • Interest for the year: $48,734 * 0.18 = $8,772

  • Total Debt: $48,734 + $8,772 = $57,506

Year 4:

  • Interest for the year: $57,506 * 0.18 = $10,351

  • Total Debt: $57,506 + $10,351 = $67,857

Year 5:

  • Interest for the year: $67,857 * 0.18 = $12,214

  • Total Debt: $67,857 + $12,214 = $80,071


As shown above, over five years without any payments, the credit card debt grows significantly, from $35,000 to over $80,000. What happens over a longer time period?


10 Years

  • $271,989.89

15 Years

  • $744,596.66

20 Years

  • $2,037,992.88


Let's look at an example of how savings can grow over time with an 8% annual interest rate on a principal of $35,000.

This example assumes the interest is compounded annually, and no additional deposits are made to the account.


Initial Savings: $35,000 Interest Rate: 8% annually

Year-by-Year Breakdown:

  • Year 1:

    • Interest for the year: $35,000 * 0.08 = $2,800

    • Total Savings: $35,000 + $2,800 = $37,800

Year 2:

  • Interest for the year: $37,800 * 0.08 = $3,024

  • Total Savings: $37,800 + $3,024 = $40,824

Year 3:

  • Interest for the year: $40,824 * 0.08 = $3,266

  • Total Savings: $40,824 + $3,266 = $44,090

Year 4:

  • Interest for the year: $44,090 * 0.08 = $3,527

  • Total Savings: $44,090 + $3,527 = $47,617

Year 5:

  • Interest for the year: $47,617 * 0.08 = $3,809

  • Total Savings: $47,617 + $3,809 = $51,426


In this example, over five years, the $35,000 investment grows to $51,426 with an 8% annual interest rate. This highlights the power of compound interest and how even a moderate interest rate can lead to substantial growth in savings over time. What happens over a longer time period?


10 Years

  • $75,626.56

15 Years

  • $103,159.39

20 Years

  • $140,799.18


Mortgage Advisor Tip: The compounding working against someone using credit cards is growing far faster than savings growth based on the gap in return. What if the same person borrowed with a HELOC instead of Credit Cards - their debt balance would be the same as the savings balance at 8% - that's a HUGE difference.

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