If you’re under 50 and feel like your credit card habits haven’t changed much over the years, you’re on target with your peers, according to a new study by the Federal Reserve Bank of Boston.
While a third of Americans pay off their credit cards every month, most people don’t. Instead they carry a balance from month to month. And their credit and debt habits pretty much stay the same from their 20’s until middle age.
For this study the Boston Fed took a close look at a sampling of 5% of all U.S. credit accounts from 1999 to 2014 to gauge the trends in consumer credit card borrowing, as well as savings and other key areas. The information came from Equifax, a credit reporting agency.
The data showed that while 35% of Americans between the ages of 25 and 50 pay off their cards at the end of the month, the most credit card debt is carried by revolvers, who pay the minimum amount due, racking up interest every month on their balance.
Saving is not trending
Saving is not on many consumers’ radar, unless they actually have to set aside that money, which can mean paying into Social Security or paying off their mortgage.
They also found that age plays a key role in credit card patterns, with people ramping up their credit card use as they move from their 20’s into their 30’s. This finding may well explain why people save less in their younger years.
Individuals who opt to keep credit card balances are often kept in check by their credit limit. But according to the study they often associate available credit with wealth.
Middle age equals lots of debt
When looking at the data the Boston Fed found that older cardholders, specifically middle-aged ones, often have very high levels of debt. The amount of credit and debt they carry translates into being in the red more often than not, with the only savings being small emergency funds and housing assets that cannot be easily liquidated.
While credit card use spikes as people move through their younger years, once they hit 50 it levels off and starts to go down. Why? As we get older lots of things change. At that point people who may have been life-long revolvers start using their credit cards when it’s convenient, rather than when they have to.