HOST, VALENTINA ZARINS MARTINEZ:
Americans are taking on more household debt. That’s from a report by the New York Federal Reserve which was released this morning. And while household debt grew in general, Isabelle Teare reports on one concerning trend: Young people are struggling to pay their credit card bills.
ISABELLE TEARE: When we talk about household debt, we’re talking about things like mortgages, auto loans and credit cards. And according to the report released today, this kind of debt grew by almost $400 billion dollars at the end of last year. But it was credit card debt that showed the largest increase – the largest quarterly increase that is – since the Federal Reserve started tracking this data back in 1999. So what does this mean?
DAVE HOLMES: Quite simply it’s that the credit card holder has outstripped their income and is being forced to make choices between where, what debts they're gonna pay on a monthly basis.
TEARE: That’s Dave Holmes. For years, he managed a team at CitiBank that focused on distressed debt and bankruptcy. Basically credit card debt happens when people are spending more than they earn. And the data shows that it’s young people in their 20s that are taking on this debt, and then failing to pay it back.
Holmes says when people start struggling to pay off their credit cards, it’s usually a sign of unemployment. But unemployment is at record lows right now.. So why are young people failing to pay their credit card bills?
The researchers from the Federal Reserve say it could be several things. Like rising interest rates coupled with inflation.
But some young people aren’t that concerned. Serena Maguire is 27 years old and works as the marketing director for a boutique jewelry designer. And she’s in credit card debt.
SERENA MAGUIRE: I feel like especially in young people, if you have a credit card it almost feels like a magical sort of – depending on the person obviously – but it feel like a magical sort of ‘sure I can go out and buy a round of shots for everyone’ or ‘yeah okay I love this dress, let me buy it I’ll pay it off eventually. It’s not that much.’ And, you know, naturally all those things build up and it becomes a bit daunting of a sum to pay off.
TEARE
And most of her friends are also in credit card debt.
MAGUIRE: And there’s maybe some sort of a level of comfort that people are seeking in that mentality also, in the sense of ‘okay I’m not the odd one out and sp that almost is a level of taking the pressure off that there’s a bigger thing happening that is affecting everyone and not just someone singularly and individually.
TEARE: Economists at the Federal Reserve say, as of now, the debt levels are not threatening the economy. But there they are watching young people closely. Right now, student loans are paused.. And if they have to start paying again, it might stress their budgets even more.
Isabelle Teare, Columbia Radio News.