WASHINGTON–With U.S. consumers holding more than $1 trillion in credit card debt, a new analysis offers insights into the true demographics of who owns credit
cards, how much they charge on them, and whether they pay their balances on time.
Much of what is commonly reported on credit cards is inaccurate, according to QZ.com, which noted “The information we have is based on surveys, and people are notoriously bad at accurately reporting their finances.”
Instead, a new study by Federal Reserve economist Joanna Stavins sets out to fix the problem.
Every year since 2008, the Federal Reserve Bank of Boston conducts a nationally representative survey asking Americans how they pay for things, according to QZ.com. That survey includes a section on credit cards.
In order to check the accuracy of their responses, Stavins compared respondents’ answers with administrative data from Equifax, which holds their actual data.
Stavins found people tend to overreport the number of credit cards they have, underreport their balances, and greatly undervalue their credit limits.
What the Data Show
Meanwhile, by combining demographic data from the Fed’s survey with Equifax, Stavins was also able to create accurate public data about how different groups of people use credit cards. The survey was conducted in 2015 and 2016.
According to Quartz.com, the data show that whether a person owns a credit card diverges hugely by age, income, and education. Overall, the data show 74% of adults have a credit card, but just 48% of those under 25 have one, compared with 87% who are 65 or over. The difference is even greater across education and income levels.
The Findings
Among the findings:
- Credit card balances also vary hugely. “While the average American maintains an average balance of $4,560, this is highly dependent on age. Balances are relatively low for the young, about $2,340 for those under 25, but grow as people get into middle age, reaching over $6,000 for people 45-54, before falling as they get older,” Quartz.com reported. “At the peak of a person’s earning power, typically in middle age, they are given larger credit limits from card companies.”
- The analysis estimated the share of people who have “revolving” credit card debt—with Stavins finding 44% of adults have revolving credit, and these people typically have an outstanding balance of $6,600. Revolvers are generally poorer and less educated than the typical American.