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Our expenses keep going up, but our credit card debt is lower than it was a decade ago

3 minute read

The end of the year is a good time to take stock of your finances; especially if you just bought a ton of gifts by holding out your credit card and covering your eyes. The good news is: fewer people seem to be doing that.

Despite relentless increases in our cost of living, we’ve kept credit card debt lower than it was a decade ago, according to NerdWallet’s annual survey of household debt. Still, their chart is pretty scary, showing the average American’s expenses overtook his income during the recession and have never let up.

Right now, our cost of living is up 30 percent from 2003, while our income is only up 28 percent. That sounds small, but when you look at the categories where spending is exploding, there’s definitely reason to worry. Especially if you’re already struggling to get by on your credit card.

Is another recession coming?

You don’t have to look far for fears of another recession. Some people expect one because they say it’s cyclical, while others are prematurely blaming Trump. Many people just want to be ready for anything after suffering heavy losses in 2007-08.

If we did face one, we’re in a better financial position now. A decade ago, the average credit card debt was $6,705. Now it’s $5,946. NerdWallet projects we won’t have more credit debt than we did in 2007 until 2019. And that’s partially because they aren’t expecting a recession in the near future. The site’s pointing to positive economic signs like low inflation, steady delinquency rates, and an improving housing market.

The Federal Reserve is also showing confidence — it just raised interest rates for only the second time in a decade, and expects to do so three times next year. But even that sort-of-good news will still increase credit card debt for many people.

Anyone who carries a credit card balance from month to month gets charged interest, and the Fed’s rate hike means that interest rate will go up for anyone that doesn’t have a fixed interest rate. The average spent on credit card interest now is $1,292 a year, and will rise to $1,309 a year with the new rate hike. That’s only $17 now, but the subsequent planned hikes could put a dent in your budget as the cost of living continues to rise.

What to watch for next year

NerdWallet’s study notes medical expenses are the fastest growing category, up 57 percent since 2003. With the future of Obamacare in question, they won’t slow down anytime soon. Make sure to maximize preventative care services and take your new year’s resolution to get in shape seriously this year.

Food and housing are also up substantially, 36 percent and 32 percent versus 2003. Look for ways to make your groceries last and ways to save on them.

Student loan growth has slowed, and fortunately, it’s a lower interest rate debt than credit cards — but the people who already have it are still stuck with it. Consider taking advantage of student loan consolidation to keep your payments manageable if other costs are getting out of hand. Credit card debt has a much higher interest rate, so make it a goal to pay off your balance in full every month before driving any extra money toward your student loans.


If you’re fortunate enough to see your income rising faster than your expenses and keep getting more credit, be careful. “Higher-income people can get higher credit limits more easily, giving them more room to rack up big balances,” NerdWallet points out.

The more you make, the less margin there is for error if you’re not taking proactive steps like building an emergency fund. Even if your debt is a smaller portion of your income, any changes to your finances — like losing your job, or a big unexpected expense — can wreck you just as bad as someone making less.


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About the Author

Brandon Ballenger

Brandon Ballenger

Having more than $10,000 in student loan debt has a way of piquing your interest in personal finance. And because my degree was in English and public communication, I get to share that interest with you. My wide-ranging stories on money and business have run on Business Insider, the Christian Science Monitor, Reader's Digest, the front pages of and Yahoo! Finance, Money Talks News, and the South Florida Business Journal. In my free time, I like to jump off skyscrapers and play video games.

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