Hannah’s post yesterday on how to get out of credit-card debt referenced the Federal Reserve’s most recent Survey of Consumer Finances, which is full of fascinating data about which households are the most likely to be in debt.
Overall, 46.1 percent of American households reported holding debt on credit cards. But a look at who is holding that debt yields surprising results.
In the section that breaks down debt by income bracket (Page A40), the report shows a peak of debtors in the 60 to 80th percentile of income (with a median salary of $71,500), with 62.1 percent of households in this bracket carrying a credit-card balance — well above the average. The bracket with the lowest percentage of debtors was the 20th percentile and under (earning a median salary of $12,300 and a debt rate at 25.7 percent). In other words: the very poorest among us.
This trend may seem counterintuitive — you would expect the poorest people to be the most in debt, and those who make more than the average household to be better financially situated — but it actually makes perfect sense.
Debt peaks among households just above the median income level because these are the people most likely to live beyond their means to try to keep up with the Joneses. And those in the 20th percentile and under are the least likely to carry credit-card debt because they don’t qualify for as many credit options in the first place (and are unlikely to qualify in the future given the new, stricter lending standards).
As for the people in the top decile of income, they are, essentially, the Joneses. And as such should really work on shedding that debt — with a median salary of $206,900, a debt rate of 40.6 percent is still too high when they’re the ones most able to afford life’s luxuries.
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