Americans Are Drowning In Debt - Alloy Wealth Management (2024)

FAQs

Why are Americans drowning in debt? ›

46% of Americans now carry over credit card debt month-to-month, driving them further into debt as credit card interest rates hit record highs. The most economically strapped Americans are hit with predatory late fees if they default on their monthly payment, perpetuating a vicious cycle of debt.

Americans are having a harder time making interest payments as savings are shrinking and a barrage of interest rate hikes by the Federal Reserve has jacked up the cost of financing.

U.S. household debt grew by $800 million from 2022 to 2023, including a 16.6% growth in credit card debt.

Not having a budget is one of the simplest causes of debt. By not being aware of how much money you have, you could be more likely to spend more than you have access to. By monitoring your finances, you can stay on top of payments and be more aware of how much money is left in your account.

One of the main culprits is consistently overspending. When the federal government spends more than its budget, it creates a deficit. In the fiscal year of 2023, it spent about $381 billion more than it collected in revenues. To pay that deficit, the government borrows money.

The share of credit card debt that's severely delinquent, defined as being more than 90 days overdue, rose to 10.7% during the first quarter of 2024, according to the Federal Reserve Bank of New York.

"Elevated prices have largely persisted, which means that Americans continue to face affordability challenges on a range of things both necessary and discretionary, including homes, vehicles, car insurance, food, electricity and travel." Indeed, the rate of price increases for food has subsided.

The average debt an American owes is $104,215 across mortgage loans, home equity lines of credit, auto loans, credit card debt, student loan debt, and other debts like personal loans. Data from Experian breaks down the average debt a consumer holds based on type, age, credit score, and state.

Average credit card debt in America is $8,674, based on 2024 data from the Federal Reserve and the U.S. Census Bureau. Credit card debt varies due to age/income/other factors, but only makes up a fraction of personal debt. The average consumer's debt in America is $104,215.

The Federal Government Has Borrowed Trillions, But Who Owns All that Debt? At the end of 2023, the nation's gross debt had reached nearly $34 trillion. Of that amount, about $27 trillion, or 79 percent, was debt held by the public — representing cash borrowed from domestic and foreign investors.

How many Americans live paycheck to paycheck? ›

Recent MarketWatch Guides survey results indicate that 66.2% of Americans feel like they're living paycheck to paycheck. Respondents struggling to make ends meet span demographics, including genders, generations and incomes.

Eliminating the U.S. government's debt is a Herculean task that could take decades. In addition to obvious steps, such as hiking taxes and slashing spending, the government could take a number of other approaches, some of them unorthodox and even controversial.

Health Care Costs Number One Cause of Bankruptcy for American Families. The cost of health care is a major concern for nearly all Americans and there is no shortage of health care related news coverage recently.

Poor budget choices and failure to follow basic financial principles can send even the richest people with a high net worth into debt.

Debt Levels of Some Countries

At 54.44 percent of GDP, China's national debt has more than doubled since 2014, when it stood at 41.54 percent of GDP. With a $5 trillion dollar (about $38 trillion) national debt, China is the world's most indebted country.

Tax cuts, stimulus programs, increased government spending, and decreased tax revenue caused by widespread unemployment generally account for sharp rises in the national debt.

If we don't have much in savings, we're more likely to lean into credit cards and carry higher-interest balances when budgets are strained. Current credit card provider APRs make this strategy more treacherous. When inflation hit a 40-year high in 2022, the Federal Reserve stepped in to try to slow down the economy.

High inflation has also fueled Americans' growing credit card debt, with millions living paycheck-to-paycheck. Typically, it's consumers' day-to-day living expenses, or some kind of emergency expense, that gets folks into trouble — not lavish spending. "Everything seems to cost more.

By January of 1835, for the first and only time, all of the government's interest-bearing debt was paid off. Congress distributed the surplus to the states (many of which were heavily in debt). The Jackson administration ended with the country almost completely out of debt!