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Credit card debt can be more expensive than most other types of debt. The reason? Not only do credit cards tend to have high interest rates, but credit card interest is often compounded daily, so it adds up quickly.
That’s why a credit card balance can be so damaging to your finances. But the good news is that all generations have managed to reduce their credit card debt since the end of 2023, according to New York Life’s latest Wealth Watch survey.
However, one generation has more credit card debt than others. And it may not be the generation you would expect.
The baby boomers are in the lead – but not in a positive sense
Baby boomers currently have the highest credit card debt of any generation, with the average balance being $7,808.93.
To be fair, Generation Xers aren’t far behind, owing an average of $7,530.31.
Millennials, on the other hand, fare a little better, with an average balance of just $5,370.06. And Generation Z has a fairly low average balance of $1,707.52.
However, Generation Z members are also younger and have fewer years of income in their accounts. Their lower balances may be due to lower incomes and credit limits.
A tactic that baby boomers can use to get out of credit card debt
Credit card debt is especially dangerous for baby boomers because many people at this age are already retired or close to retirement. It’s hard enough to keep up with debt payments when you’re working and earning a salary. Once you’re no longer working, paying off that debt can become even more difficult. Therefore, it’s in baby boomers’ best interest to get rid of their credit card debt as quickly as possible.
One tactic that could work is leveraging home equity. According to the National Council on Aging, Americans ages 65 and older have an average of $250,000 in home equity. Consolidating your credit card debt into a home equity loan could make it much easier to pay off.
The reason? You may get a much lower interest rate on a home equity loan than on your credit cards. And that interest rate is fixed, so your monthly payments are more predictable.
A trick all can be used to pay off credit card debt
Regardless of your age and whether or not you own a home, a personal loan is another good option for consolidating credit card debt. Like a home equity loan, a personal loan offers the benefit of a fixed interest rate and consistent monthly payments, which you may find easier to manage because you know what to expect.
Additionally, with a home equity loan, you run the risk of losing your home if you fall behind on your payments. There are negative consequences for falling behind on personal loan payments, but foreclosure is usually not one of them.
Credit card debt is bad news at any age. It’s worth doing everything you can to get rid of your debt as quickly as possible and make it less expensive while you pay it back.
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