Consumer Debt by Age Cohort: Credit Card Bills Stand Out but Not Always

22. August 2018.

Here is an interesting story picked up by CNBC, which pulls data from Northwestern Mutual, a financial planning firm. The numbers make sense and are worth a quick read.

  • The average American now has about $38,000 in personal debt, excluding home mortgages. That’s up $1,000 from a year ago, according to Northwestern Mutual’s 2018 Planning & Progress Study, which also reports that “fewer people said they carry ‘no debt’ this year compared to 2017 (23 percent vs. 27 percent).”

Their survey breaks the population into four age group. The short story is although credit card debt is a large component of each group, this type of debt only weights highest for the older millennial group. For other segments, student and mortgage debt play a higher role in the household budget.

  • Gen Z & younger millennials (ages 18-24): $22,000. For those ages 18 to 24, it’s no surprise that student loans are the highest source of debt (28 percent), followed by credit card balances.

  • Older millennials (ages 25-34): $42,000. Among older millennials, credit card balances are the leading source of debt, making up a fourth of what average older millennials owe.

  • Gen X (ages 35-49): $39,000. For those ages 35 to 49, home mortgages are the No. 1 source of debt: They account for about 32 percent of the members of this age group typically owe, the survey finds. Credit card debt is the No. 2 source, while car loans and education debt tie for around 7 percent each.

  • Baby boomers (age 50+): $36,000. Those who are age 50 or older have the second-lowest amount of debt, which is good news. And similar to Gen-Xers, the top three sources are, in order: mortgages, credit card bills and car loans.

Card issuing strategies used to center on the cradle-to-grave approach. You’d capture the cardholder in their college years with easy credit, then nurture the relationship through when they would start a household, mature through their golden years, and hopefully get into retirement planning. There is still merit to this view but today, you deal with changing trends in home ownership, shifting household patterns in savings, and the disruption of the internet.

This is a moving target, but knowledge is power.

Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group

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