It’s relatively easy to get into credit card debt these days. Whether it’s from emotional spending or taking care of your actual needs, credit cards make it easy to spend more than you have. This can be helpful if you don’t have cash on hand to pay for something right away, but it can cause a problem if you get into the habit of paying for things you can’t afford with credit. A common trap people fall into is paying off their credit but then not having enough money left over to pay for their basic necessities and having to use credit again. This can become a never-ending cycle that’s difficult to get out of.
Many people are susceptible to the credit card debt cycle, but none more so than millennials.
According to a Morning Consult and Business Insider survey, 51% of millennials have credit card debt. (This survey defined millennials as people between 23 and 38, and we will use this same definition for this article). The survey also reported that 54% of millennials owed less than $5000, 24% owed between $5000 and 10,000, and 22% owed over 10,000. Needless to say, millennials seem to have a lot of credit card debt. Why is that?
While no one can say with certainty why millennials seem to have so much credit card debt, most experts seem to agree is that it’s due to the fact that annual incomes have only increased by $29 since 1974 for people aged 25 to 34 while older age groups saw increases of up to $5400 over the same period. At the same time, housing and education costs have risen quickly, and millennials are being affected more than any other generation. Student debt has doubled in the last decade, and millennials spend almost 45% of their incomes on housing costs, which is more than any other age group. As a result, more of the money millennials earn is being taken up by rent and student loan payments, causing people in their 20s and 30s to fall back on credit cards to pay for the rest of their basic needs.
Another issue is medical costs. Even when millennials have good insurance, it doesn’t always mean that medical services’ full cost is covered. Many plans cover only 80% of the service cost, and the patient is responsible for the remaining 20%. If you have the bad fortune to need a lot of medical care, the costs could add up, and the easiest thing to do is to put those costs on a credit card. And this is assuming you have insurance, to begin with. If you don’t have insurance, the costs will be much higher, putting you much more in debt.
The biggest issue with the amount of credit card debt that millennials are in is how much it costs them. Credit card debt comes with high-interest rates and the interest compounds. This means that their outstanding credit card balance only gets bigger if all a person can do is make the minimum payments. That being said, the outlook isn’t all bleak.
There are several debt consolidation options for millennials that combine their overdue debts into a single loan with a reasonable interest rate and a shorter payoff schedule. It’s, therefore, a simple way to save thousands of dollars in interest payments and get out of debt faster.
Furthermore, debt consolidation loans are easy to get online. There are a variety of sites that allow you to search a database of lenders for one that’s willing to extend a loan to get you out of debt. You can then apply for a loan online in minutes without having to go to a bank or having to wait to talk to someone.
However, debt consolidation can’t solve everything. Unfortunately, the truth of the matter is that millennials are at risk of being stuck in a debt cycle until the standard of living changes.