KERA’s One Crisis Away project looks at life on the financial edge. Today: our addiction to credit cards. A report from the Federal Reserve Bank of Boston shows that despite the shaky economy, our credit habits are hard to break.
Americans in their 40s typically have about $3,000 in credit card debt, while the average 80-year-old owes more than $600. Ben Steverman has reported on the figures for Bloomberg News and explored the results with KERA.
Interview Highlights: Ben Steverman ...
... on what the Federal Reserve report found: "As people get older, they don't necessarily cut back on their credit use much -- not until they get to their 50s do they really stop using credit quite as much. That's a little bit of a surprise because I think everybody assumes that young people are using a lot of credit card debt, especially when you're first starting out. You have an emergency you need to put on the credit card and you don't have the income to replace it. But when people get older, they make more money and you assume that as time goes on they start to cut back on their use of credit card and that really only happens when they get into their 50s and 60s and 70s."
... on why the typical American is always in credit card debt: "Some people pay off their credit card bills every month. They're basically convenience users of credit cards -- that's about 35 percent of people between the ages of 25 and 50. So only about one-third of people are really paying off their bills every single month. The rest are carrying over a balance and they're paying fees on that and they're paying interest on that. When we say that people are always in debt, we mean that first of all when they're working -- in their working years -- most people are carrying over a balance. Even as they get older, even when they're in their 70s, we still have about 45 percent of people who are not paying off their bill every month."
... on whether people will ever learn to control their credit spending: "I think the big takeaway is that for most people it's really unavoidable. When they have a temptation to use credit, they use it. Maybe the takeaway is that there is no safe amount of credit card debt. Now that's one takeaway but there is another view and I think almost equally valid, which is that we need credit. Our wages are stagnant in this country and have been for a little while and one of the things credit helps people do is just get through the hard times. So maybe what's unavoidable isn't necessarily that we can't control our spending, maybe the problem here is that we're not making enough money to really meet the needs that we have in our lives."
Ben Steverman is a reporter for Bloomberg News.