Pushing the Limit: Credit Card Debt Burdens American Families
By Christian E. Weller, Senior Economist, Center for American Progress
During the past few years, the United States has experienced an unprecedented boom in
household debt. For the first time on record, families have outstanding debt that is greater
than their incomes. To a large degree, this rise in debt is a consequence of rapidly rising
costs for large ticket items such as housing, medical care, and education, amid flat or
Although most household debt is in the form of mortgages and home equity lines, credit
card debt often receives particular attention. This is usually due to the costs associated
with credit cards rather than because of the amount owed on credit cards. Credit card
debt, of course, tends to carry high interest rates, large fees, and a number of hidden
costs. These factors disproportionately affect lower income families, who are
disproportionately renters, and thus, cannot borrow funds against their homes via home
equity lines of credit, which is a significantly less costly form of debt.
A closer look at credit card debt shows the following:
• Credit card debt has become more widespread. A larger share of families (46.2
percent in 2004) than ever before carried credit card balances, up from 39.6
percent in 1989. Typical credit card debt has grown to its highest level on record.
By 2004, the typical family with credit card debt owed $2,150 (in 2004 dollars),
up 62.9 percent since 1989.
• Credit card debt levels relative to income are highest among low-income families.
Low-income families owed the equivalent of 9.5 percent of their income on credit
cards, while middle-class families owed 5.2 percent, and high-income families
owed 2.3 percent.
• Typical credit card payments pose a small but disproportionate burden on
families’ incomes. Typical credit card payments relative to income rose faster
than total payments from 1989 to 2004.
• Credit card debt