Study: America's Most Educated Have the Most Credit Card Debt

by Elizabeth Aldrich | Updated July 21, 2021 - First published on Oct. 16, 2020

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People with college degrees have more than double the credit card debt of those who didn't finish high school.

When you think of people drowning in credit card debt, do you picture people who never finished high school or people with college degrees? If it’s the latter, that’s more accurate.

A recent study on credit card debt statistics done by The Ascent reveals truths about those with the most credit card debt in America. Amongst the most indebted are those with a college degree.

College-educated households are less likely to have credit card debt, but they have more of it when they do

The study looked at two measures of credit card debt by education level -- the percentage of households who have any credit card debt, and the average amount of credit card debt per household.

When it comes to the percentage of families holding credit card debt, college-educated households sit somewhere in the middle. Households in which the head didn't complete high school are least likely to have credit card debt, with only 35% of them carrying a balance. A slightly higher number of those with a high school diploma (44%) and those with a college degree (41%) hold credit card debt. Finally, the most likely to have credit card debt: over half of households in which the head has completed some college (51%) have credit card debt.

However, when you look at the average amount of credit card debt by education level, folks with a college degree take it -- by a long shot.

Heads of household with no high school diploma still fare best, with average credit card balances per household of $3,800. Those with a high school diploma or some college are doing slightly worse, with average credit card debt of $4,600 and $4,700, respectively.

For households in which the head has a college degree, the average credit card debt is a whopping $8,200 -- double or nearly double the amount held by any other category.

Why college-educated Americans tend to have more credit card debt

There are plenty of possible explanations for why college-educated households have significantly higher credit card balances than others. The most obvious is probably education loans. Folks with a college degree are often burdened with large amounts of debt upon graduation. If they have to make large loan payments, they have less disposable income, and are more likely to rely on credit cards to fill gaps between income and spending level.

Higher levels of credit card debt can also be a matter of increased access to credit. Folks with a bachelor's degree or higher also tend to make more money. With higher income levels, they're more likely to qualify for higher credit limits. Racking up a credit card balance of $8,200 isn't even possible if you only qualify for a credit card with a $2,000 limit.

Finally, there may also be more pressure to participate in lifestyle creep -- that is, spending more money on luxury purchases as income increases -- amongst the college-educated. This type of "keeping up with the Joneses" spending can land even the highest earners in a position where they're spending more than they make, which explains why there are people who make well above six figures and are in credit card debt.

How to avoid and pay off credit card debt

The key to avoiding credit card debt is simple on paper: spend less than you make. In practice, this can prove easier said than done for most people.

Two things are imperative to keeping your finances in line and avoiding debt: making enough money to cover your basic living costs, and sticking to a budget. If you're currently spending more than you make, you have to cut costs or increase your income, and a little bit of both is ideal. Creating a budget and building in ways to stick to it -- such as receiving notifications from your bank when you get close to the limit in one of your spending categories -- will also help. Anyone can create a budget, even in the age of COVID-19, so get started today.

If you're already paying off credit card debt, cutting costs and putting all your disposable income toward that debt is crucial. Credit card interest fees add up fast, so the quicker you can pay down your balance, the better. You can also consider a balance transfer credit card to pay off your debt interest-free, which can save you money and help you pay off debt faster. Just make sure you're able to pay off your balance within the introductory period.

Avoiding credit card debt isn't easy, especially when the cost of living is rising and the pressure to buy more is strong. But with discipline and persistence, it's possible.

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