It turns out that Americans with net worth of over $ 100,000 are more likely to have credit card debt than people with negative net worth. According to Bankrate.com, 58 percent of people with this net worth owe at least $ 2,500 and 39 percent owe at least $ 5,000.
46 percent of those who earn more than $ 80,000 a year have credit card debt. The lowest income bracket, people with an income of $ 40,000 or less, had the least debt. Incidentally, the data does not contain any "transactors" or consumers who pay out their credit every month.
"If you really did create wealth, my thought was that you would have no credit card debt," said Ted Rossman, an analyst at Bankrate.com, who is closely monitoring credit card trends.
It is important to note that a significant portion of people's net worth is often tied up in their homes. So on paper they can be worth a lot, but that doesn't mean they have cash.
The survey found that the most common reason for accumulating credit card debt was to pay for current expenses such as groceries, utilities, and childcare costs (28 percent). This was followed by retail purchases such as clothing and electronics (16 percent), car repairs (11 percent), medical debt (11 percent) and vacation (9 percent).
Here are other reasons people have given for accumulating debt:
● "A granddaughter's wedding."
● "Birthday and Christmas presents."
● "Fast food consumption."
● "I repaired my own rental properties with credit cards."
● "Mother's funeral expenses."
● "Bad decisions when younger."
High-income people who have credit card debt could be victims of lifestyle creep, Rossman said. This is when people's living standards improve with increasing income, so luxury is seen as a necessity.
"Let's say you get promoted and earn a 10 percent increase, but you raise your standard of living by the same amount. You're no better off," he said.
To put it bluntly, Rossman does not suggest living a miserable life.
"Life and money should be fun," he said. “But you also have to be smart and live within your means and save for your future. If you have sufficient emergency savings and your debts are under control, be sure to treat yourself part of your increase and transfer the rest. But if you previously lived from paycheck to paycheck and had no savings and had a lot of credit card debt and did not save for retirement , you need to use a lot more of your raise for these priorities. "
Easier access to credit is another factor that may explain why higher income people accumulate debt, Rossman said. "Just because someone gives you a credit card or line of credit doesn't necessarily mean that this is the best option for you," he said.
That is why this survey is important.
The money you use to pay off high-interest credit card debt could be better used for long-term wealth accumulation, said Corbin Blackwell, financial planner at Betterment.
"In the past 20 years, the US stock market has averaged 8 percent a year, but in eight of those years returns have been well below 5 percent," said Blackwell. “Ultimately, your dollars should go on paying off high-interest debt. The only time you can give investment priority over debt repayment is when your debt has an interest rate below 5 percent. "
Even if you know how expensive it can be to pay credit card debt, it is still by far the most common form of debt.
42 percent of all adults in the United States have credit card debt, followed by auto loans or leasing (27 percent), mortgages (26 percent), student loans (16 percent), and personal loans (12 percent), according to Bankrate.com.
I have advised many individuals and couples who have paid and paid off credit card debt for purchases that were not required.
I also know that life happens. You can manage your credit card after a job loss or a medical crisis. But if you use your plastic to live above your means, this is a money movement that is just putting you under pressure.