Which U.S. Households Have Credit Card Debt?

In this blog post, we examine the income differences between households with credit card debt and those without such debt using the 2022 Survey of Consumer Finances (SCF). Motivated by growing delinquencies and interest rates on U.S. credit card debt, we sought to discern which households face this financial burden. Our analysis suggests that households with credit card debt tend to concentrate in the middle of the income distribution. However, lower-income households have the highest ratio of credit card debt relative to monthly income.

The Federal Reserve conducts the SCF every three years on a cross-sectional sample of U.S. households, surveying them about their demographics and balance sheet, income and other financial characteristics. We split respondents to the latest SCF into two groups: one consisting of households with credit card debt and another consisting of households with no credit card debt. We defined households with credit card debt as those that reported nonzero credit card balances. This means that they did not pay the full amount owed on their card or cards at the end of the month, and so carried forward a balance.

According to the SCF data, 51% of American households held credit card debt in 2022, and while credit card debt accounted for only about 7% of overall household debt, its interest rates tend to be higher than those of other forms of consumer debt, making it relatively expensive.

Households with Credit Card Debt across the Income Distribution

To better understand which households carry this burden, we calculated the share of households with credit card debt by income decile, with the first decile being the lowest income group and the 10th decile being the highest income group. We can see in the following figure that households in the upper-middle of the income distribution—those in the fifth, sixth and seventh deciles—were the most likely to hold credit card debt. In fact, 60% of households in the seventh decile had credit card debt, compared with only 25% and 28% in the 10th and first deciles, respectively. Note that this figure does not speak to the value of this debt, merely what proportion of households in each decile hold at least some credit card debt.

Share of Households with Credit Card Debt in Each Income Decile

SOURCES: 2022 Survey of Consumer Finances and authors’ calculations.

NOTE: The first decile is the lowest income group, and the 10th decile is the highest income group.

One possible explanation for this concentration of debt could be that households in the lowest income deciles may not have good enough credit history to obtain a credit card, or they may lack access to banking services. Conversely, households in higher income deciles may be more likely to have the necessary cash and savings to avoid accumulating high-interest debt on their credit cards. Meanwhile, households in the middle of the income distribution might find it relatively easy to access credit cards, but then may use them to cover emergency or other expenses while lacking the necessary cash or savings to pay off their balances at the end of the month.

Credit Card Debt to Monthly Income across the Income Distribution

The figure below looks at the size of households’ credit card debt (for those that have such debt) relative to their monthly incomes by income decile. It shows that as income decile increases, households generally hold less credit card debt as a percentage of income. This makes sense, because households in higher deciles, by definition, have larger incomes to offset their credit card debt when calculating this ratio. They may also have more savings and greater access to debt instruments like personal loans, which are cheaper than credit card debt. The exceptions to this trend, despite the households having higher incomes relative to the lower end of the distribution, are the fifth, sixth and seventh deciles. These are the same deciles in which the greatest shares of households have credit card debt. However, it is still the lowest-income households that have the overall highest ratio of credit card debt to monthly income. In fact, credit card balances are equal to over 90% of monthly income for these households.

Ratio of Credit Card Debt to Monthly Income for Each Income Decile

SOURCES: 2022 Survey of Consumer Finances and authors’ calculations.

NOTE: The first decile is the lowest income group, and the 10th decile is the highest income group.

For many, payments on credit card debt represent a significant financial burden month to month: Estimates from SCF data indicate that households with balances were paying on average $180 per month on that credit card debt. As mentioned, the relatively high interest rate on this debt makes it an expensive form of borrowing. And if credit card interest rates continue to rise, this debt burden may become even larger.

To put this into perspective, the average U.S. household with credit card debt has a balance of around $7,226. In November 2021, the interest rate on this debt was around 15%, meaning that the average indebted household was paying $90 per month in credit card interest. By November 2023, the interest rate had risen to around 21%. Now that same household was paying $126 per month in credit card interest alone, without even paying down the debt’s principal. By way of comparison, interest rates on personal loans over this same period only increased from around 9% to 12%. Households forced to take on even more credit card debt to cover emergency expenses would see their payments grow further still. Households in the lowest decile of the income distribution have the most credit card debt relative to their incomes, making them the least equipped to see their payments go up significantly.

In sum, households with credit card debt appear to be concentrated in the middle of the income distribution, where they may have relatively easy access to credit cards but could need to go into debt to cover emergency expenses. However, households at the bottom of the income distribution tend to have the highest ratios of credit card debt to monthly income, as they may have less cash and savings and less access to more attractive lending options with lower interest rates, such as personal loans.