Burden of Debt on Americans - Concern of 2016

The level of personal debt in the USA has always been a matter of concern. The recession did not help of course and many who had managed their finances fairly well before the crash fell victim due to circumstances largely beyond their control. They may have had a manageable level of credit card debt even though it is not a good idea to carry that forward because of the high interest rate charged at the end of each month. However what was manageable was suddenly a problem as unemployment figures rose due to the problems that spread beyond national borders. Those who were already in financial trouble had no chance of recovery.

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Survey Says

The recession has gone and a great deal of debt has been written off. Job creation has been on the 'up' for many months in succession and although wages have only been rising slowly the signs in the economy are good. However the level of debt is extremely disturbing, especially bearing in mind the need for citizens to save for retirement. A recent report by CreditCards.com suggests that 20% of the people interviewed believe that they will be unable to repay their current debts in their lifetime. The survey spoke to 4,000 people and while 22% also said they had no significant debt, previous studies along the same lines two years ago had those who felt their debt levels were unmanageable were in single figures as a percentage.

Equally worrying was the perception that over 30% of the respondents had was the fact they expected to be well beyond retirement age before they could clear their debts. It assumes that they are not going to take on extra debt in the future. There is such a thing as 'good debt' if it works to positively help someone's situation. If for example someone is paying a high level of interest on credit cards they ought to be able to save themselves money by clearing that debt with no credit check loans at a lower rate of interest.


The report backs up a similar publication by the Pew Charitable Trusts that says that 80% of Americans are in debt and it is particularly the case amongst those in middle age. Obviously where that debt is in the form of a mortgage that may be helping them build up an asset if the real estate involved is growing in value.

The Trusts' report broke things down into different age groups and different forms of debt. It seems the younger generation, described in the report as 'Millennials' are more likely to have debt relating to their education, and perhaps a car loan than a mortgage. That is not particularly surprising as the recession and the fall in real estate values seems to have made the younger generation more reluctant to buy property at this stage. The average credit card debt among this generation is $2,500 in the 40% that admit a debt.

Middle Age, Middle Income

That figure doubles amongst those in middle age who are also likely to have education loans still to settle. In addition many have car loans and of course mortgage debt is significant. Mortgages can be taken over a period as long as 30 years and although the interest rates are low, a mortgage becomes a burden to those who are at retirement age and beyond because either they are then living on their retirement savings and Social Security or they need to continue to work, at least part time to meet their financial commitments.

Pew makes some observations about the figures and points out that over the last few decades Americans have been more comfortable to take on debt, and of course it has been more readily available. Credit card companies aggressively marketed their products, especially during the years before the recession struck. The upshot was that many people had a number of credit cards and often juggled balances from one to the next when 0% balance transfers were on offer.

The increased cost of education has been another important factor. Taking out a student loan to fund education makes sense if that is going to result in someone gaining qualifications that may improve career prospects. The resulting debt still needs to be paid off.

Recent figures released by the Federal Reserve states the total level of debt in American society was $3.5m, a steady increase in recent years. The deeper problem is that those on lower incomes appear to fairly debt free because they are concerned just to pay their everyday bills. It is those who earn a little more who appear to be overstretching themselves. The stricter criteria now in place for obtaining credit may well be a factor; the low paid do not have the same access to credit may be a factor.

While it is sometimes wrong to generalize, it appears that the problem lies in the mid-income category of people, and often in middle age when their likely annual income expectations are settled. The solution to the problem for those within this category may not be simple which is why many expect to die in debt. Perhaps it is time for each and every one of them to sit down, prepare a budget and live by it. Credit card debt needs to be the first to go because it is expensive. While personal loans are available at competitive interest rates, they should look to reduce their liabilities by finding out more.