The majority of Americans’ credit card debt is tied to essential costs

‘As living costs continue to rise and economic uncertainties persist, more people are finding it difficult to stay on top of their financial obligation,’ a recent research paper noted

Nearly three-quarters of the nation’s credit card debt is tied to everyday living expenses, according to a research paper from a regional bank.

Some 73 percent of the $1.21 trillion credit card debt - roughly $883 billion - was racked up to cover emergency or everyday expenses, such as “car repairs, medical bills, home repairs, and routine living costs,” found the new research from Kansas City-headquartered Academy Bank.

“High-interest debt poses a serious financial burden for many American adults, affecting their ability to save and plan for the future,” the study noted. “As living costs continue to rise and economic uncertainties persist, more people are finding it difficult to stay on top of their financial obligations.”

When asked about the primary causes of their debt, cardholders with balances responded in the following way:

• Day-to-day expenses: 28 percent
• Other unexpected expenses: 16 percent
• Car repairs: 11 percent
• Retail purchases: 11 percent
• Medical bills: 10 percent
• Vacation or entertainment: 9 percent
• Home repairs: 8 percent
• Other reasons: 7 percent.

The majority of credit card debt Americans have is due to everyday expenses, according to a new research paper (Alamy/PA)

The research paper deemed day-to-day expenses, car repairs, medical bills, and home repairs as “everyday” expenses. Retail purchases, vacation and entertainment, and “other reasons” purchases were counted as discretionary spending.

People are chipping away at their debt, though. Some 57 percent of consumers are already paying down their credit card debt, the paper noted. Another 30 percent planned to pay down their debt by earning more money, and 17 percent said they’d attack their debt once they got past the expensive season of life they were going through. Finally, 31 percent planned to pay off their debt with a tax refund or other future financial windfall (16 percent and 15 percent, respectively).

Consumers pointed to high interest rates as the reason why they were having a hard time eliminating their credit card debt. “On top of rising credit card balances as a result of an increasing cost of living, high interest rates on credit cards often contribute to a cardholder’s inability to pay off debt,” the research paper said.

Academy Bank referenced a Forbes Advisor study to illustrate how consumers’ fight to pay down their credit card debt impacted them:

• Sleep difficulties: 48 percent
• Increased anxiety: 40 percent
• Diminished social life: 38 percent
• Depression: 34 percent.

Ways to pay down debt quicker

Personal loans are one way that consumers can pay off their credit card debt more quickly. Additionally, if a consumer has multiple credit cards, a personal loan can consolidate all credit card balances into one single monthly payment, according to the Federal Trade Commission’s Consumer Advice resource.

Generally speaking, personal loans offer a lower interest rate than credit cards - 11.65 percent versus 20.97 percent, according to the latest figures from the Federal Reserve - and don’t require you to offer collateral in return.

Riskier consolidation options include home equity loans and home equity lines of credit. While their interest rates tend to be lower than personal loans and credit loans, they require your home as collateral. If you fall behind on your payments, there’s a chance you could lose your home, the commission noted.