American credit card holders in their late 20s and early 30s have more debt than older consumers, repay it more slowly and risk dying in debt if they don't curb their spending habits, a new study showed on Monday.
Researchers that people born between 1980 and 1984 have on average $5,689 more debt than their parents had at the same stage of their lives, and $8,156 more than their grandparents.
"If what we found continues to hold true, we may have more elderly people with substantial financial problems in the future," said Lucia Dunn, a co-author of the study and a professor of economics at Ohio State University.
"Our projections are that the typical credit card holder among younger Americans who keep a balance will die still owning money on their cards," she added in a statement.
Dunn, and Sarah Jiany, of Capital One Financial in McLean, Virginia and a co-author of the study, analyzed two large monthly surveys which included data on borrowing and repayment, enabling them to estimate when Americans will be able to repay their credit cards.
The findings were published in the journal Economic Inquiry.
"We have data on how they pay off credit cards as well, which gives us a more complete picture of their debt situation," Dunn said. "This allows us to estimate more precisely when Americans will be able to pay off their credit card debts."
Working with data from 1997 to 2009, the researchers studied how 32,542 people aged 18 to 85 accumulated and repaid their credit card bills. They compared 15 five-year-period birth groups, such as people born from 1915 to 1919, the oldest group. People born between 1985 to 1989 were the youngest studied.
The researchers also compared people in different age groups but with similar educations, incomes and marital status, and estimated that the payoff rate of younger credit card holders was 24 percentage points lower than their parents, and 77 points lower than their grandparents' rates.
"Credit is more readily available now, and there have been changes in interest rates and less stigma attached to having credit card debt, which may all make younger people today more willing to go into debt," Dunn explained.
The study also showed that credit card holders react to higher minimum payments by paying more than they have to.
But Dunn said the results were a cautionary tale.
"If our findings persist, we may be faced with a financial crisis among elderly people who can't pay off their credit cards."