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Young Americans are falling into the credit card debt trap

Young people in Maryland and elsewhere around the country are having difficulties keeping up with their credit card bills, according to a recent New York Federal Reserve report. The central bank's Quarterly Report on Household Debt and Credit for the first quarter of 2019 reveals that almost 1 in 10 millennial and generation Z borrowers have not made credit card payments for 90 days or more. This is the highest delinquency rate among young borrowers in eight years.

These accounts are likely falling into arrears because of rising interest rates. In 2018, the Federal Reserve raised rates four times, and even borrowers with excellent credit now pay an average rate of 18% on their revolving debt. Those with unestablished or poor credit histories are often charged as much as 25% interest on their credit card balances. Younger borrowers also pay more because they tend to choose cards that offer travel bonuses or generous rewards schemes instead of low introductory interest rates.

The number of young people who use credit cards has risen significantly in recent years. More than half of Americans in their 20s now have at least one revolving debt account. In 2012, that figure was 41%. Student loan delinquencies are also on the rise, and more than 10% of educational debt is now 90 days or more past due.

Credit cards provide Americans with a quick and convenient way to borrow, but turning to them to cover basic needs after a financial setback can lead to an inescapable spiral of debt. Attorneys with experience in this area could dispel the misconceptions and myths that shroud debt relief, and they could also explain how filing a Chapter 7 or 13 bankruptcy petition provides an escape from credit card debt and offers the chance of a fresh financial start.

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