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Americans and Debt: It’s Complicated

[Wednesday, August 19th, 2015]

Most people don’t want to be in debt, but a recent survey from The Pew Charitable Trusts illustrated that while folks may prefer not to carry any debt, it’s not always a bad thing—and for many, it’s a necessity.

The survey polled 7,845 Americans about their attitudes toward debt and looked at data from the Survey of Consumer Finances, which was supplied by the Federal Reserve Board. Eighty percent of those surveyed carried some type of debt, and 70% said being in debt was necessary for them, even though they wished they weren’t in debt.

Some of the most commons types of debt included mortgages, student loans, and credit cards. Mortgages were the most common type of debt among survey respondents. In some cases, taking on debt at a young age can mean having a better chance of building wealth later. However, accruing debt when you’re older doesn’t have the same association with having better financial opportunities down the road. People who went into debt later were more likely to experience long-term financial insecurity.

Diana Elliott, research manager for Pew’s financial security and mobility project, explained that debt wasn’t always an indicator of financial trouble. “The typical American family’s debt levels are high, and that can cause financial problems—but that is not the full story,” said Elliott. “Our findings show that debt can also be an important component of overall financial health, provided it is sustainable and is used to support investments in families’ futures.”

Debt among the different generations

Four generations were studied: the “silent generation,” born between 1928 and 1945, Baby Boomers, born between 1946 and 1964, Generation X, born between 1965 and 1980, and Millennials, born between 1981 and 1997.

For people of every generation, mortgages were the most common type of debt; however, Generation X had higher mortgage debts than any other generation did at the same age. Generation X, as well as Millennials, tended to have higher income and higher net worth along with higher debt loads, indicating their ability to boost economic mobility by taking on debt. People in older generations did not have the same association between higher debt and higher income and net worth.

Eighty-nine percent of Generation X-ers and 86% of Millennials carried debt, while 80% of Baby Boomers and 56% of the silent generation had debt.

Credit card debt and balance transfers

One of the more popular—and effective—methods of dealing with credit card debt is to apply for a balance transfer credit card, which allows folks to pay off debt at a lower interest rate or with a limited-time 0% APR offer.

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