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Why is credit card debt increasing among young Americans?

Those who study consumer debt had been expressing optimism in recent years over young adults’ seeming aversion to taking on credit card debt and consumer loan products. Millennials and those in the group following them (Generation Z) were doing better than their parents’ generation at staying out of debt.

As the business editor for Axios put it, “It is the ‘We don’t own’ generation. It is unusual when we think of this cohort. These were the people who didn’t take on debt.” That appears to be changing.

According to the New York Federal Reserve, the number of young adults in the U.S. who are delinquent on their credit cards by at least 90 days has been rising significantly. These delinquencies among people between 18 and 29 recently hit an eight-year high this year.

Smart marketing strategies by credit card companies are at least partially behind this increase. They’re offering attractive incentives, like zero-percent interest. A generally strong economy may have something to do with it as well.

Of course, that zero-percent interest rate doesn’t last. In fact, the Federal Reserve has been raising interest rates just as more young people are getting their first credit cards. One industry analyst says, “With interest rates going up, the average credit card rate is 18%, and that’s for people with good credit. It can be as high as 25%.”

An official with the New York Fed notes that although the “rate at which credit card balances become delinquent has been rising, and that has coincided with an increase in younger borrowers entering the credit card market….”these delinquency rates are increasing from historically low levels and remain below pre-financial-crisis levels.”

The biggest debt burden for many young adults remains student loans. The industry analyst, however, says, “Student loans are good debt, building skills and hopefully wealth in the long run, and interest rates are a lot lower.” On the other hand, “Credit card debt is much harder to get out of….” Unfortunately, many young credit card holders, like older ones, rely on credit cards to cover everyday expenses as well as emergencies, such as car repairs and medical care.

If your credit card and other debt are impacting your ability to handle your financial obligations, it may be worthwhile to consider the option of bankruptcy. An experienced bankruptcy attorney can provide more information and guidance based on your specific situation.

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