Are you going to die in debt? The process of paying off your debt can feel like an endless nightmare, and for many people it could actually end up becoming reality. If you’re currently under the age of 40, there’s a good chance you will literally go to your grave still owing money.
A recently released Ohio State University study came to the dismal conclusion that younger generations are both taking on more debt and and paying it off much more slowly than any generation before them. The study, which lasted 13 years, surveyed 32,542 people between the ages of 18 and 85. The participants were categorized by age into groups called grandparents (born in the ’20s), parents (born in the ’50s) and children (born in the ’80s).
The children, it seems, need a time-out. They’re almost $6,000 more in debt than the parents were at the same stage in the game, and they’re $8,000 more in debt than the grandparents were at that age. And what’s even worse is the glacial rate at which the kids are paying it off.
The study looked not just at how much people borrow, but at their complete debt payment habits as well. As Lucia Dunn, one of the study’s authors, explained, This allows us to estimate more precisely when Americans will be able to pay off their credit card debts. Those in the children group paid off their debt 77% more slowly than the grandparents did and 24% more slowly than the parents did. The thing is, at that rate they may never get out of debt. Our projections, Dunn said, are that the typical credit card holder among younger Americans who keep a balance will die still owning money on their cards.
This utterly abysmal conclusion would make anyone ask why it has to be this way. But the answer is simple. Credit culture is responsible. Credit cards are more accessible than they’ve ever been, interest rates have gone down and the stigma of being in debt has been diminished. After all, everyone’s doing it and if everyone’s doing it, is it really even a problem? The study’s authors think so, and we agree. If the pattern continues, America will be plagued with tons of financially unstable senior citizens who are unable to pay off their credit cards. And as we’ve already discussed, that’s just no good.
We’ve been bringing you mostly good news lately at Credit Card Assist. Unfortunately, this is just not one of those days. There is, however, a silver lining to this black cloud of never-ending debt. The payoff data collected by the study revealed that an increase as small as 1% on a credit card’s minimum payment requirements can light enough of a psychological fire under people’s bottoms to get them back on track. In fact, it nearly doubled the rate at which participants paid off their debt. If credit card companies would take this data into consideration and raise their minimum payment requirements, that would make a huge difference in the debt problem.
But since that will never happen, we’re left to own devices. Let’s make 2013 count for something. If you pay just a little bit more each month on your credit card debt, that shrinking balance might just inspire you to keep on going.