Americans in 20’s and 30’s have more credit card debt

American credit card holders in their late 20s and early 30s have  more debt than older consumers, repay it more slowly and risk dying in debt if  they don’t curb their spending habits, a new study showed on Monday.

Researchers that people born between 1980 and 1984 have on average  $5,689 more debt than their parents had at the same stage of their lives, and  $8,156 more than their grandparents.

“If what we found continues to hold  true, we may have more elderly people with substantial financial problems in the  future,” said Lucia Dunn, a co-author of the study and a professor of economics  at Ohio State University.

“Our projections are that the typical credit  card holder among younger Americans who keep a balance will die still owning  money on their cards,” she added in a statement.

Dunn, and Sarah Jiany,  of Capital One Financial in McLean, Va., and a co-author of the study,  analyzed two large monthly surveys which included data on borrowing and  repayment, enabling them to estimate when Americans will be able to repay their  credit cards.

The findings were published in the journal Economic  Inquiry.

“We have data on how they pay off credit cards as well, which  gives us a more complete picture of their debt situation,” Dunn said. “This  allows us to estimate more precisely when Americans will be able to pay off  their credit card debts.”

Working with data from 1997 to 2009, the  researchers studied how 32,542 people aged 18 to 85 accumulated and repaid their  credit card bills. They compared 15 five-year-period birth groups, such as  people born from 1915 to 1919, the oldest group. People born between 1985 to  1989 were the youngest studied.

The researchers also compared people in  different age groups but with similar educations, incomes and marital status,  and estimated that the payoff rate of younger credit card holders was 24  percentage points lower than their parents, and 77 points lower than their  grandparents’ rates.

“Credit is more readily available now, and there  have been changes in interest rates and less stigma attached to having credit  card debt, which may all make younger people today more willing to go into  debt,” Dunn explained.

The study also showed that credit card holders  react to higher minimum payments by paying more than they have to.

But  Dunn said the results were a cautionary tale.

“If our findings persist,  we may be faced with a financial crisis among elderly people who can’t pay off  their credit cards.”

Patricia Reaney

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