Keeping your finances in order is a challenge. If you add credit cards and debt to the mix? You add another layer of complexity. When you borrow money by applying for loans or using a credit card, you’re usually spending more money than you think. Add interest and fees, and suddenly, you’re in deeper than you thought. The fact is, budgeting, planning, and figuring out your income and expenditures is difficult to master — in fact, many people never seem to figure it out. Credit card balances make it even harder.
A new survey from Affirm, a company founded by PayPal co-founder Max Levchin, dug into the struggles people have with credit card balances to give us a better idea of how much of a problem it is. Interestingly enough, while many Americans are seemingly averse to accumulating debt, their actions tell a different story.
“Drawing upon a survey of 1,089 U.S. individuals between the ages of 22 and 44, the study reveals that while a large percentage of consumers worry about the mismanagement of credit cards, they are simultaneously open to a healthy amount of debt,” Affirm’s team told The Cheat Sheet.
The survey revealed that the cycle of debt that credit cards introduce into people’s lives creates a lot of havoc. Interestingly enough, people don’t even need to have incurred debt for it to have a serious psychological impact. From Affirm’s survey, here are seven key findings that show the big impact credit card debt is having on many Americans.
1. Most people worry about debt — a lot
According to the survey, “60 percent of respondents are moderately, very or extremely worried about getting into debt.” So, more than half of the population (if this sample proves representative of most Americans’ feelings) are not just struggling with debt. They’re struggling with worrying about getting into debt. People who aren’t even in debt are grappling with fears related to debt.
2. Debt makes purchases less enjoyable
If you’re going to make a big purchase, you’re doing so because you plan on enjoying it. And if you plan on borrowing to make that purchase, you’d damn well better enjoy it, right? Well, that doesn’t seem to be the case for a lot of people. According to the survey, “46 percent of respondents who have carried a credit card balance enjoyed some purchases less due to carrying that balance.”
The fact that some people had to use a credit card made the purchase less enjoyable. The lesson? Saving up and delaying gratification may be more rewarding.
3. People have a legit fear of debt
It’s not just worrying about debts that Americans are struggling with. It’s fear. Actual, legit, fear. Some of us are scared of clowns or shark attacks. According to the survey, “nearly 2/3 of respondents (65 percent) have a fear of debt.” Again, we’re seeing people who may not even be in debt who are struggling with issues related to worry and fear involved with it.
4. The majority of people carry a four-figure balance
Most people owe somebody money, be it a student loan or mortgage. But when it comes to credit card debt, more than half of Americans are carrying balances that tally up to at least $1,000. The survey found that “57 percent of respondents who said they are carrying a credit card balance have at least $1,000 in credit card debt.”
5. Members of Gen X are worse off than millennials
Millennials catch a lot of hell from other generations for being irresponsible, especially when it comes to career and finance issues. But interestingly enough, Gen Xers evidently struggle more with debt than Gen Y. The survey said that “31 percent of 35-44 year-olds have at least $5,000 in debt vs. 18 percent of millennials.”
6. People aren’t paying off their balances every month
We already know that a lot of Americans are carrying credit card balances. The problem is that those balances garner more interest, and keep perpetuating the cycle. This is why it’s so important to make more than the minimum payment if you can. And if you do end up using a credit card? Pay it off at the end of the month.
“Over half (52 percent) of respondents who have a credit card are currently carrying a credit card balance from a previous month,” the survey found.
7. Many can’t pay off their balances for some time
Picking up from the last point — those balances from previous months? In many cases, they’re hefty enough that it will take several months to pay off. “Almost half of respondents who carry this credit card balance (48 percent) believe it will take more than six months to pay off,” the survey said. If you can, avoid racking up a balance that you can’t pay off at the end of the month. Otherwise, you’ll dig yourself into a deeper whole than you anticipated.
See the full study on the Affirm site.