10 Alarming Stats About American Consumer Debt That Should Concern You

Americans today live in what is likely the most productive economic marketplace the world has ever known. Numerous gigantic corporations — many originating in the United States — have surpassed the $1 trillion valuation mark, and companies like Nvidia (considered by many to be the world's most important stock) rise even farther above that level. Even so, the economy is booming but often creates the conditions to enrich those with the highest levels of wealth while leaving the rest behind. One area in which this trend can be seen most prominently is within the world of consumer debt usage habits.

Americans across the financial spectrum rely on debt products to fund all kinds of expenses. From mortgage loans to credit card spending (perhaps through a cash back card account), personal lending is a huge industry in the American marketplace and beyond. Naturally, as is typically the case with all things financial (think: grocery bills and utility costs via inflation), the amount of debt that Americans collectively owe to their lenders grows steadily over time. But that's not the whole story. Unfortunately, the larger picture of American borrowing is perhaps far bleaker than you might expect. However, it gives the average consumer the ability to understand where they find themselves in the grand scheme of things, allowing for an intelligent plan of attack to form when chasing off high credit card balances, old medical debts, and other consumer borrowing products.

The last three years of data indicates that Americans are taking on more debt than ever before. Total consumer debt in the United States stood at $15.31 trillion in 2021, this rose to $16.38 trillion in 2022 and ballooned even further to $17.1 trillion the next year. Increasing debt burdens are not a new phenomenon in the United States. With inflation on the rise and tough decisions coming into the budgets of everyday Americans at a rapid pace, a turn to credit card spending and other lending products is only natural. Indeed, as many as 78% of Americans live paycheck to paycheck and only 44% note that they would cover a sudden $1,000 expense without turning to a lending product for support (and 27% of respondents to a Bankrate survey say they have no emergency savings at all).

You might take solace in the fact that the jump from 2021 to 2022 was over $1 trillion, while the subsequent rise cut down on the pace substantially (only an increase of about $700 billion). However, with stagnant wages continuing to be a huge problem for the American workforce and inflation remaining as a crucial sticking point in just about any conversation about the economy, a slowdown in the galloping pace of rising consumer debt is just a waypoint along the journey toward increasingly unstable personal finance.

Among the most troubling statistics seen relating to American consumer debt, the type of debts taken on is trending toward categorically higher cost options. The total volume of debt within low cost buckets such as student loans, mortgages, and even car loans are relatively stable over the last few years. Moreover, helped along by the government's policies surrounding federal education financing, student loan figures are actually on the decline while all other lending types have risen in volume since 2021.

However, a rise of 3.2% in mortgage debt is dwarfed by the 17.4% increase in credit card debt across the American consumer landscape. Add in the 15.3% boost in total retail credit card balances and this revolving line of credit trend takes on a more sinister glow. Retail store cards can be a valuable addition to your overall financial mix, but that assumes you're fully aware of the terms and conditions of use and have a plan for paying off the balance before the deferred interest rate kicks in and severely changes the repayment conditions. A growing volume of high interest debt with static growth among low interest lending products signals larger trouble within the American consumer landscape.

Financial struggles can be seen all across the country. Whether it's a home buyer investing more than they can afford into a property of their own (becoming house poor in the process), or someone using a balance transfer to make ends meet without a strategy for repaying the burden, potentially risky financial decisions exist in many shades and in even more American households. But it turns out that there is some geographical significance within American consumer data sets.

The people who call the nation's southern states home are, on average, more likely to have lower FICO scores and have recently added more heavily to their total debt burden. Figures trending in these directions are more prevalent in states like Florida, Mississippi, and Tennessee than they are in Michigan, Minnesota, or Massachusetts. This isn't to say that everyone in Alabama has a low credit score or that residents of South Carolina are objectively worse candidates for a home loan than others who might live in Wisconsin. However, the data points to an uptick in trend magnitude across the aggregate as you look farther south.

Perhaps one reason for the regional discrepancy in credit scores and borrowing habits lies in the demographics of these locales. In addition to statistically worse borrowing conditions for those in the south, these local areas see huge proportionality differences among non-white populations. Black Americans, as an example, make up a disproportionate slice of countywide communities in the south when compared to the demographic's national footprint. Much of states like South Carolina and Mississippi are home to countywide populations made up of at least 30% Black Americans while the entirety of other places like Washington or New Mexico are home to zero counties with a Black population above 10% of their total.

Taken in context, this is a telling piece of detail. Non-white Americans are far more likely to face enhanced difficulties when seeking a credit card, personal loan, or mortgage approval. Debt.org notes that Native American borrowers in particular "are largely credit invisible." White Americans possess the highest median credit scores, calculated at 727, while Hispanic and Black borrowers showcase median scores of 667 and 627, respectively. Because of this discrepancy, non-white borrowers are more likely to see higher interest rates when approved for lending products, perhaps directly correlating with a reduced incidence of use. White families showcase average credit card balances of nearly $7,000 to Black families' $4,000. However, there's yet another wrinkle to consider. Black (and Hispanic) family debt-to-income ratios are wildly higher than their white neighbors – 46.8% and 46.2% to white borrowers' 2.5%. This closes off certain borrowing avenues like those within the mortgage marketplace.

It might come as little surprise, but younger people are growing their debt burdens while older Americans are generally paying theirs off. The largest total debt is felt among Millennial and Gen X borrowers, but their experiences diverge from that one similarity. Millennial borrowers saw an average debt increase of roughly $10,000 from 2022 to 2023, while Gen X average debt rose by $3,000. A similar increase was seen among the youngest borrowers, and those in older age brackets reduced their average debt figures rather than continuing to contribute to them.

Paired up with the typical avenue of borrowing that Americans are using – credit cards, retail accounts, and the like — a precipitous rise in debt volume is a troubling trend. However, it's also worth noting that older Americans aren't taking huge chunks off of their total bill, on the other end of the spectrum. Baby Boomers saw their average debt fall by just over $1,000 from 2022 to 2023, and those in the Silent Generation cut down their average by about $700. The reality is that the average American is spinning their wheels without making much progress in a positive direction when it comes to reducing financial obligations.

Another major discrepancy in the debt load that typical Americans face today can be seen in its relationship to savings and income figures. While it's already well-established that Americans don't tend to save as much as they should in many instances (from emergency savings to efficiently tracking with their retirement goals through their thirties, fifties, and beyond), Income levels are a different piece of the puzzle. Today, average household debt loads have risen beyond $100,000 and contrast problematically against median income figures of $90,000 per household. It's perhaps not surprising that household debt would be higher than income, especially given the enormous weight of mortgage financing. In the past as well as the present, a bank loan designed to launch a consumer into property ownership has always amplified spending power far beyond the buyer's annual income.

But there's more to the story today than in past decades. Over the last 10 years, home prices have increased at a rapid pace (even without huge outlier figures dominating the pandemic years). This means the borrowers looking to buy their next home are going deeper and deeper into debt at the exponential rate to make this move. Coupled with minimal wage expansion and a turn toward more expensive lending products, it's clear that household debt loads are becoming increasingly characterized by more "bad debt." The result is increased vulnerability and weaker financial health on the whole.

People with greater levels of wealth are more likely to carry debt. This is perhaps due to additional financing options when purchasing cars, homes, and other essentials. Those at the low end of the wealth spectrum are more likely to avoid risky debt products when possible due to high interest rates and increased overall costs, although this is certainly a generalization. A liberal exposure to cost effective borrowing opportunities makes those with more wealth more open to their use. However, the real statistic at play here isn't the amount of debt that people owe across this wealth spectrum. Rather, it's important to note that people with low incomes and smaller total wealth accumulated have a harder time paying off debt. Those in the top income bands pay just 4.31% of their income toward their debts while those at the bottom pay out 26.11%.

The contrast is stark, and understanding how much of your income goes to servicing debt is a critical piece of information that can help you make better financial decisions. Indeed, the total amount you owe is only one piece of the puzzle, a new mortgage loan adds to your total debt burden, certainly. But the more impactful number in a macro sense comes in the form of your monthly payment figure, especially when stacked up against your monthly income and other necessary spending demands.

Every family dynamic is unique, but on average when a couple welcomes a child into their home their household debt figure rises 14% over the national average. A family with four or more children experiences an average debt burden that's 51% higher than the national average figure. On the surface, this isn't particularly surprising. Households that support children have higher expense loads in many cases than those that don't. Extra mouths to feed, more essential purchases for more people, and other similar expenses all factor into this equation. Likewise, just because you are spending more money after welcoming a new child into your home doesn't mean you're necessarily making more money so increased credit card usage and cuts to other areas of your budget are likely ports of call as your family dynamic changes.

Another feature that plays a role here is quite surprising. Not only do families with children average a greater debt load than those without, they also typically exhibit reduced credit scores. This means that the average borrower with a child may have to settle for a more expensive debt product when borrowing for something important than their compatriot who doesn't have any children.

Many borrowers don't think all that much about credit card delinquency. Delinquency rates for all age groups stand at less than 10%, with some significantly lower. However, serious delinquency — or a credit card balance becoming more than 90 days behind — is inching higher among all ages of the American population. At the end of 2022, 18.3 million people were behind on credit card payments. The most vulnerable among credit card users is naturally those in the youngest cohort. Those 18 to 29 saw a delinquency rate of 7.6% while 30 to 39 year olds were delinquent at rate of 5.69%. The figure drops from there but actually sees a return to slightly elevated rates among those 70 and older (3.49%), highlighting a vulnerability later in retirement that shouldn't be ignored.

A slight bump in credit card delinquency may not seem like it affects you directly. However, the fact that it is happening across the board suggests a widespread financial weakness that impacts all aspects of the American consumer marketplace. Just because you haven't been delinquent before doesn't mean it can't happen in the future with the constant weight of ever increasing financial pressure from external forces. Similarly, rising delinquency rates mean that credit card companies are losing out on a portion of their profits at a steadily expanding pace. To counteract this negative pressure, credit card companies may boost fees for usage or mismanagement, increase interest rates, or introduce new cost cutting measures that make the consumer experience definitively worse and likely more expensive.

Finally, while Millennials owe the most on average in terms of mortgage debt, Gen Z borrowing has increased by nearly twice the percentage figure of the next highest group. Gen Z borrowing rose 7.7% from 2022 to 2023 in average mortgage debt while Millennials debt load in this category increased by 4.4% over the same time period. Interestingly, every age demographic saw an increase in their average mortgage debt from 2022 to 2023, but those in Gen. X and older experienced expansion of less than 2% on average, equating to as little as $1,500 in increased obligations.

Among the effects of a Baby Boomer exit from the real estate market, Gen Z is poised to reap the highest demographic rewards. But this striking increase illuminates something else going on in the market. The oldest cohort among Gen Zers is 27, but the average age for a first time home buyer is 38, more than a decade older. With intense competition in the real estate market, elevated interest rates on new mortgage loans, and an age range that includes 12 year olds who, age-wise, find themselves sitting roughly halfway between their first days in a classroom and final high school lessons, Gen Z buyers aren't typically people who might be in a prime financial position to purchase anything other than a fixer upper or something similar. As a result, it's worth keeping an eye on this trend and pairing it with more data points surrounding the types of homes that the youngest buyers are investing in to understand their financial picture in greater clarity — especially if you're one of them.