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Chase Sapphire Preferred Review: What To Know Before You Apply

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any credit card issuer. This site may be compensated through a credit card issuer partnership.

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travel train

The information related to Chase Sapphire Preferred® Card, Chase Sapphire Reserve® and the Citi® Double Cash Card – 18 month BT offer has been collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication.

If you want a rewards credit card, Chase Sapphire Preferred® Card is worth considering. However, the card is not right for everyone. Here are the highlights:

  • A great sign-up bonus – Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $750 toward travel when you redeem through Chase Ultimate Rewards®.
  • Annual fee of $95.
  • Earn 2X points on travel and dining at restaurants & 1 point per dollar spent on all other purchases worldwide. If you spend a lot of money on travel and dining, this is a great way to boost your earnings. 1 point per dollar spent on all other purchases.
  • If you redeem your points for travel using the Chase Ultimate Rewards® portal, your points are worth 25% more. For example, that 60,000 point sign-up bonus could be worth $750 of travel purchases.
  • You can also transfer your points to leading airlines (like United and Southwest) or hotels (like Marriott or Hyatt) on a 1:1 basis.=

The most value goes to people who spend a lot of their money on travel or dining and want to redeem their points for travel. If you are a foodie and traveler looking to get free trips faster, this card is a great tool to earn free travel fast. Depending upon how much you spend on travel, you might even want to consider the Chase Sapphire Reserve® instead. The Chase Sapphire Reserve® is Chase’s most exclusive card yet. You Earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. — That’s $750 toward travel when you redeem through Chase Ultimate Rewards. You earn 3X points on travel immediately after earning your $300 travel credit. 3X points on dining at restaurants & 1 point per $1 spent on all other purchases. But you have a $550 annual fee (instead of $95), and it is not waived during the first year. The least value goes to people who spend very little or no money on travel or dining and want to redeem for cash back or gift cards. Spending on all other categories (outside of travel and dining) only earns 1 point per $1 spent. And every 100 points is worth $1 of cash back. That means you would only be earning 1% cash back, which is a very low rate. Using our guide to the best cash back credit cards, you should be able to earn at least 2% on your spending.

How to Earn Points

You can earn 2 points on every dollar spent on travel (from cabs to airplane tickets) and dining. In order to get 2 points, the merchant needs to be classified as a “restaurant” or “travel.”

Dining is a relatively simple classification. All restaurants should classify as dining. Many bars (even those that don’t serve food) may be classified as “dining.” And even most popular food delivery services are categorized as dining (although there have been some reports of GrubHub not always earning 2x points). Here is the exact definition from the Chase website:

  • Merchants in the restaurants category are merchants whose primary business is sit-down or eat-in dining, including fast food restaurants as well as fine dining establishments. Please note that some merchants that sell food and drinks located within larger merchants such as sports stadiums, hotels and casinos, theme parks, grocery and department stores will not be included in this category unless the merchant has set up such purchases to be classified in a restaurant category.

The “travel” category is actually a lot broader than you might imagine. Paying for airplane tickets and hotel stays definitely counts as travel. But Airbnb, New York taxis, and even highway tolls will also count as travel. Here is the exact definition from Chase:

  • Merchants in the travel category include airlines, hotels, motels, timeshares, car rental agencies, cruise lines, travel agencies, discount travel sites, campgrounds and operators of passenger trains, buses, taxis, limousines, ferries, toll bridges and highways, and parking lots and garages. Please note that some merchants that provide transportation and travel-related services are not included in this category; for example, real estate agents, in-flight goods and services, on-board cruise line goods and services, sightseeing activities, excursions, tourist attractions, merchants within hotels and airports, and merchants that rent vehicles for the purpose of hauling. In addition, the purchasing of points or miles does not qualify in this category.

You will earn 1 point per $1 spent on all other spending with your Chase Sapphire Preferred® Card card.

There is no maximum to the number of points that you can earn.

How Much Are the Points Worth?

When you earn points with the Chase Sapphire Preferred® Card card, you are earning “Ultimate Rewards®” points. There are a number of ways that these points can be used. How valuable each point is depends on how you choose to use it.

Here’s a summary:

  • When you redeem points for cash, a statement credit, or a gift card: every 100 points earned = $1
  • When you redeem points for travel using Chase’s Ultimate Rewards® travel portal: every 100 points = $1.25
  • When you transfer points to travel partners: It depends upon the award that you are able to get in the program. For example, you could get a round-trip ticket to Europe on United Airlines for as few as 115,000 miles round trip or as many as 300,000 miles. You just have to shop on the United Airlines website to see how many miles they are charging for the flight. Unfortunately, the number of miles is determined by the airline and is at their discretion.

Who the Chase Sapphire Preferred® Card Doesn’t Work For

If your objective is to earn cash back on all your purchases, Chase Sapphire Preferred® Card is not the best option for you.

Why? Every 100 points you earn is only worth $1. That means you will get a 2% return on restaurant and travel spending, and only 1% return on everything else. You can do a lot better with a cash back credit card like the Citi® Double Cash Card – 18 month BT offer, where you can Earn 2% cash back on purchases: 1% when you buy plus 1% as you pay.

Redeeming Points for Travel Rewards

As a Chase Sapphire Preferred® Card cardholder, you can book travel using the Chase Ultimate Rewards travel portal. You can book flights, hotels, car rentals, and other activities using the portal. The travel portal is like your own online travel agency:

who-the-chase-sapphire-preferred-card-doesnt-work-for

To pay for the travel, you can use Chase Ultimate Reward points, your Chase card, or both. Your Ultimate Rewards points carry even more value when you book using the portal. You only need 80 points to cover $1 of travel expense. For example, if an airfare is $500, you would only need 40,000 points to pay for the ticket. If you only had 30,000 points, you could apply those toward the balance and use cash or your credit card to cover the rest. The 30,000 points would deduct $375 from the purchase price, and you could pay for the remaining $125 out of pocket.

Booking travel through the portal really boosts the value of your credit card. That means you are actually earning:

  • 2.5% on every $1 you spend on restaurants and travel
  • 1.25% on every $1 you spend on everything else — and you can boost this by using Chase Freedom Unlimited® (see below)

Transfer to Travel Partners You have the opportunity to earn the best possible return when you transfer your points to a travel partner. Chase Ultimate Rewards has an amazing coalition of travel partners where you can transfer your points 1:1. These include: =

  • Airlines: United Airlines, Southwest Airlines, and a number of foreign carriers (including British Airways, Air France, JetBlue TrueBlue, Singapore Airlines, and Virgin Atlantic)
  • Hotels: Hyatt, IHG, Marriott, and Ritz-Carlton

The value of your points when transferred depends upon how you redeem them. You will get some of the best returns (and the most fun) when you can you nab a coveted “saver” travel award through one of Chase’s partner airlines. Most airlines have different tiers of fares that are reserved for people who are booking using miles or points. “Saver” awards are often the most deeply discounted and that’s when you get the most bang for your buck when it comes to redeeming points.

For example, we recently looked up a trip to London from Newark on the United Airlines website for a four-day weekend in April. Using our award points, we found a round-trip “saver” award fare for just 115,000 points for business class flight. That same flight cost nearly $5,000 in cash.

If you use those 115,000 points to book travel on the Chase Ultimate Rewards portal, it is worth $1,725. And if you want to convert those points into cash deposited into your bank account, it would be worth $1,150.

With some advance planning, you can get the biggest returns on your Chase Ultimate Rewards points by transferring your points to Chase airline partners and finding deals on international business class flights. But you have to plan in advance and have a flexible travel schedule if you want to get the best business class redemption opportunities.

Remember: You can transfer points from Chase Ultimate Rewards to your existing frequent flier accounts. If you have 40,000 miles in your United Airlines account already and need more miles for an award, you can easily (and instantly) top up your existing account by transferring at a 1:1 ratio.

Boost Your Earning with the  Chase Freedom Unlimited®

One of the weaknesses of the Chase Sapphire Preferred® Card is that you only earn 1 point on all of your spending outside of the restaurant and travel categories. Fortunately, there is a way to boost your earnings.

Chase recently introduced the Chase Freedom Unlimited® credit card. With this credit card, you earn a 1.5% cash back offer. The good news is that you can combine those Chase Ultimate Rewards points with your Chase Sapphire Reserve® Ultimate Reward points. Even better: There is no annual fee on the Chase Freedom Unlimited® credit card.

To get the best value, use:

  • Chase Freedom Unlimited® for all purchases except dining and travel, and
  • Chase Sapphire Preferred® Card for all dining and travel purchases, and
  • Use your points to redeem for travel on the Chase Ultimate Rewards portal or get a great deal redeeming frequent flier miles with one of the travel partners

The returns could be even higher if you transferred your points to a travel partner and snagged a great reward ticket.

The information related to the Chase Freedom Unlimited® card has been collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication.

What Are the Fees and Charges Associated with the Card?

Here are some of the key fees and charges that come with the Chase Sapphire Preferred® Card:

  • Annual Fee: $95
  • Foreign Transaction Fee: $0
  • Late Fee: Up to $15 if the balance is less than $100; up to $27 if the balance is $100 to less than $250; up to $37 if the balance is $250 or more

Having no foreign transaction fee is an excellent benefit, especially if you are a frequent traveler. There are still cards out there charging a hefty 3% on all foreign purchases.

Figuring out whether or not to pay the annual fee does take a little extra work. Remember that you can easily Earn 2% cash back on purchases: 1% when you buy plus 1% as you pay. with the Citi® Double Cash Card – 18 month BT offer credit card, which has a $0 annual fee. That is the baseline return. If you spend $2,000 a month, you could earn $480 a year in cash back. Can you beat that return?

If you are a foodie and world traveler, and you spend all $2,000 a month in the dining and travel categories, you can be much better off with Chase. If you use your card to redeem for travel or transfer to partners, you should be able to earn at least a 2.5% return. That means $20,000 of spend in the dining and travel categories would get you $600 of value before the annual fee. After the annual fee of $95 (waived the first year), you would get $505 of value during the ongoing years — which is a better deal than the flat 2% card. And there is a reason the Chase Sapphire Preferred® Card is such a great option for travelers: you can get even better returns when you use your miles strategically, and the more you spend in dining and travel categories (above $20,000 a year), the better the card.

This card is not ideal for people who:

  • Do not spend a lot of money in travel and dining categories
  • Do not want to redeem their points for travel (would rather have the cash)

Other Card Benefits

In addition to earning points, there are a number of other benefits that come associated with the Chase Sapphire Preferred® Card. You can tell that this card is targeted toward the traveler because some of the richest (and, in our opinion, best) benefits are travel related. Make sure you understand them because if you are a regular traveler, you will likely have the opportunity to take advantage of them.

Car Rental Insurance

With this card, you get a primary auto rental collision damage waiver benefit. If you decline the auto rental company’s collision insurance and charge the entire rental cost to your card, you can receive coverage that provides reimbursement for up to the actual cash value of the vehicle for theft and collision damage for most rental cars in the U.S. and abroad. Having primary coverage is a big deal — it means you don’t have to submit a claim to your own auto insurance company first (which could result in higher insurance rates after a claim).

The insurance provided on the credit card only deals with collision. You need to have a strategy in place for other risks. Auto insurers typically sell four types of policies. They are:

  • Collision (Loss Damage Waiver): Your Sapphire card can replace this.
  • Liability: If you damage someone else’s property or person, you could be held liable (and the amount of the liability could be significant). You should check to see if your existing auto insurance provides liability coverage on your rental. If it doesn’t, or if you don’t have an auto insurance policy, consider buying that protection at the counter.
  • Personal Effects: This policy protects any items that are damaged while in the rental car. Depending upon your situation, you might not need this coverage.
  • Personal Accident Insurance: This is typically a health care policy that is not necessary if you have sufficient coverage from your existing health insurance.

If you are renting a car overseas, be sure to check with your credit card before traveling to make sure you are covered in that country.

Trip Delay

Remember when airlines used to provide you with a free hotel room if you got stuck somewhere overnight? Not any longer. Thankfully, Chase Sapphire Preferred® Card steps in to the rescue.

If your common carrier travel is delayed more than 12 hours or requires an overnight stay, you and your family are covered for unreimbursed expenses, such as meals and lodging, up to $500 per ticket.

Baggage Delay

You can get reimbursed for essential purchases like toiletries and clothing for baggage delays over six hours by passenger carrier up to $100 a day for five days.

Trip Cancellation

If your trip is canceled or cut short by sickness, severe weather, and other covered situations, you can be reimbursed up to $10,000 per trip for your prepaid, nonrefundable travel expenses, including passenger fares, tours, and hotels.

Other Benefits

The Chase Sapphire Preferred® Card also offers purchase protection, price protection, return protection, and extended warranty protection benefits.

How to Get Approved

As you can tell from the details of the Chase Sapphire Preferred® Card, it comes rich with rewards and benefits. And it targets people with excellent or good credit.

If you have a a credit score in the fair/average range or you have missed a lot of payments historically, you will likely be rejected.

People with the best chance of being approved have Excellent credit.

If you have a bad credit score and are looking for a credit card, you can review our guide here.

An Example of Who Gets the Most from the Chase Sapphire Preferred® Card

Here is a profile of an ideal Chase Sapphire Preferred® Card customer:

Mary lives in New York City. She doesn’t have a car (because she uses the subway), and she spends a ton of money eating out and traveling. She has a good job and a good credit score but would love to travel even more.

This card is ideal for Mary because:

  • So much of her spending is on dining and travel, which earns at the highest level.
  • She wants to earn free travel, and the redemption opportunities are richest when redeemed for travel.
  • She doesn’t have primary auto insurance (because she doesn’t have a car) so the primary auto rental benefit is ideal.
  • She has excellent credit.

If that sounds like you, the Chase Sapphire Preferred® Card is a great addition to your wallet or purse.

An Example of Who Gets the Least from the Chase Sapphire Preferred® Card

Here is a profile of someone who might be better off with a different card:

John is a father of three. He spends a lot of money on groceries (to feed his growing family) and gas (to drive to all of his children’s events). He just doesn’t have the money to eat out, and hopes to do some traveling later in life — once he funds three college educations.

There are other options that would be much better for John. Because none of his spending would be in dining or travel, he would only be earning 1 point for every $1 spent. Because he would not be redeeming his points for travel, he would likely be earning only 1% on his spending. John would be better with a cash back credit card that better rewarded his spending patterns.

Should I Consider the Chase Sapphire Reserve® Instead?

In the last year, Chase also introduced the incredibly popular Chase Sapphire Reserve® card. Here are the key differences between the Chase Sapphire Preferred® Card and Chase Sapphire Reserve®?:

  • There is an annual fee of $550. It is not waived during the first year. However, you can receive up to $300 in statement credits annually as reimbursement for travel purchases such as airfare and hotels charged to your card.
  • You earn 3X points on travel immediately after earning your $300 travel credit. 3X points on dining at restaurants & 1 point per $1 spent on all other purchases.
  • When you redeem for travel on the Chase travel portal, you get 50% more value (compared to only 25% more value for the Chase Sapphire Preferred® Card).
  • Just like the Chase Sapphire Preferred® Card, you earn 1 point for every $1 spent in all other categories (excluding dining and travel).

For spending in travel and dining that is redeemed on the Chase travel portal, you get incredible value. Every $1 spent on travel and dining is worth 3 points. And 3 points redeemed for travel on the Chase travel portal would be worth 4.5 cents. That means you could get an incredible 4.5% of value on the Chase Sapphire Reserve® compared to 2.5% on Chase Sapphire Preferred® Card.

When you decide between the two cards ask yourself the following question:

  1. Do you spend at least $300 a year on travel? If yes, answer the next question. If no, the Reserve card might not be for you.
  2. If you spend at least $300 on travel and more than $3,750 a year in travel and dining combined — you will be better off with the Chase Sapphire Reserve® card.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Credit Cards, Reviews

CreditStacks Mastercard Review

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any credit card issuer. This site may be compensated through a credit card issuer partnership.

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The CreditStacks Mastercard offers a unique opportunity for individuals with little or no U.S. credit history – such as recent college graduates or professionals relocating to the U.S. for employment – to be approved for a credit card.

That’s because instead of requiring a Social Security number (SSN) or individual taxpayer identification number (ITIN) as most traditional credit cards do, the CreditStacks Mastercard allows applicants to apply using a valid passport or U.S. government-issued ID, a U.S. visa or a permanent resident “green” card (if applicable), as well as proof of income. The CreditStacks Mastercard also allows you to apply up to 60 days prior to starting your new job in the U.S.

We break down the pros and cons of the CreditStacks Mastercard, and show how it compares to the Capital One® Secured Mastercard®, which is also designed to help individuals establish or rebuild credit.

CreditStacks Mastercard pros

No credit history required. With the CreditStacks Mastercard, you can apply without a Social Security number and with little or no U.S. credit history. Once you obtain your Social Security number, you must provide it within 60 days of account opening. At that point, CreditStacks will begin reporting your credit activity to the Equifax and TransUnion credit bureaus.

Note, if you have been living in the U.S. for more than one year, you will be required to provide a Social Security number when applying for the card. A credit check may also be performed.

Decent credit limit. The CreditStacks Mastercard offers a credit line of up to $5,000 – which is a generous amount for an unsecured credit card that doesn’t require credit history.

Your credit limit will be determined by the proprietary underwriting procedures of CreditStacks, which will consider your current employment situation and additional factors, instead of your credit score.

No annual fee. The CreditStacks Mastercard comes with a $0 annual fee.

Additional CreditStacks Mastercard benefits:

  • Mastercard ID Theft Protection(™). Access free identity theft resolution services, as well as Mastercard ID Theft Alerts(™).
  • Extended warranty. Receive an extended warranty of up to one year past a manufacturer’s warranty of 12 months or less.
  • Purchase protection. If you are dissatisfied with a purchase, you may be eligible to receive a full refund for up to 60 days from the date of purchase.
  • Price protection. Get reimbursed for the difference if you find a lower price for an eligible new item within 60 days of purchase using your CreditStacks Mastercard.
  • Purchase assurance. Cardholders receive coverage if an item is lost, damaged or stolen within 90 days of purchase.
  • Travel protections. The CreditStacks Mastercard offers a MasterRental(R) collision damage waiver, lost or damaged luggage insurance, travel accident insurance, baggage delay insurance and trip cancellation and trip interruption insurance. Plus, receive access to exclusive experiences and offers through Priceless Cities and special travel offers through Mastercard’s online booking tool.
  • Cellphone insurance. If you use your CreditStacks Mastercard to pay your monthly cellphone bill, you can receive coverage against theft or damage of up to $600 per claim and up to $1,000 per 12-month period.

CreditStacks Mastercard cons

No rewards program. The CreditStacks Mastercard does not offer a sign-up bonus or rewards on the purchases you make using the credit card. That said, when trying to build or rebuild credit, it’s best to focus on paying your bill on time and in full (when possible) each month, rather than racking up rewards.

No intro APR on purchases. The CreditStacks Mastercard does not offer a 0% intro APR on purchases – meaning, if you don’t pay your balance in full each month, you will be subject to interest charges at a rate of 15.49% Variable APR.

That said, the card’s ongoing APR for purchases is reasonable – considering that some cards designed for individuals with little or no credit come with APRs upwards of 26.99% (variable).

Compare it to the Capital One® Secured Mastercard®

Similar to the CreditStacks Mastercard, the Capital One® Secured Mastercard® is designed for individuals with little or no credit. However, because it is a secured credit card, the Capital One® Secured Mastercard® requires a refundable security deposit of $49, $99 or $200, for an initial credit line of $200.

If you deposit more money before your account opens, you may be eligible for a higher credit line, up to $1,000. Additionally, you can be given access to a higher credit line after demonstrating responsible card usage by making your first five monthly payments on time.

While the Capital One® Secured Mastercard® does not require U.S. citizenship to apply, it does require a valid SSN or ITIN, as well as a residential address in the U.S. or a U.S. military location.

See how the cards compare side-by-side in the table below.

CreditStacks Mastercard vs. Capital One® Secured Mastercard®

 CreditStacks MastercardCapital One® Secured Mastercard®
Annual fee$0$0
Rewards rateN/AN/A
Credit lineUp to $5,000$200-$1,000
Deposit requiredNone$49, $99 or $200
Regular purchase APR15.49% Variable26.99% (Variable)

The Capital One® Secured Mastercard® also comes with a number of benefits, including auto rental collision damage waiver, travel accident insurance, extended warranty and 24-hour travel assistance services. As a Capital One member, you will also have access to virtual card numbers and account alerts from Eno, as well as access to your credit score and fraud monitoring through CreditWise.

But if you plan to carry a balance on your card, you’ll be better off with the CreditStacks Mastercard, since the Capital One® Secured Mastercard® comes with a substantially higher APR of 26.99% (Variable).

Read our: Capital One Secured Mastercard review

Which credit card is best for me?

If you haven’t yet established credit in the U.S., the CreditStacks Mastercard could be a good fit. In addition to not requiring a Social Security number for approval, the card helps build your credit by reporting to two major credit bureaus.

But if you’re in the market for a secured credit card and already have a SSN or ITIN, the Capital One® Secured Mastercard® is a good alternative. While the card offers a much lower credit line than the CreditStacks Mastercard, it does offer a variety of useful benefits that aren’t common for a secured credit card.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Credit Cards, Featured, News

Average U.S. Credit Card Debt in 2020

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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Credit card balances are at all-time highs, and absent any other relief, the recent rate cuts by the Federal Reserve will do little to slow down growth in total balances that borrowers carry month to month. And while it’s still too early to know for certain, the cash crunch many households are experiencing in 2020 due to the COVID-19 pandemic may mean even greater average monthly balance increases than in recent years.

We’ve updated our statistics on credit card debt in America to illustrate how much consumers are now taking on.

  • Americans paid banks $121 billion in credit card interest in 2019. That’s up 7% from $113 billion in interest paid in 2018, and up 56% since 2014.
  • In February 2020, the average APR on credit card accounts assessed interest was 16.61%. Although the Federal Reserve has cut the key Federal Funds rate by two percentage points since mid-2019, the more recent cuts aren’t yet reflected in lower interest assessed to balances carried from month to month.
  • Total revolving credit balances are $1.05 trillion, as of February 2020. The vast amount of this balance is from spending on credit cards from banks and retailers, while $83 billion comes from revolving balances, such as overdraft lines of credit.
  • Americans carry $687 billion in credit card debt that isn’t paid in full each month. This estimate includes people paying interest, as well as those carrying a balance on a card with a 0% intro rate.
  • 43.2% of credit card accounts aren’t paid in full each month. Those who don’t pay in full tend to have higher balances, which is why the percentage of balances not paid in full (71%) is higher than the percentage of accounts not paid in full (43.2%).
  • The average credit card balance in 2019 was $6,194 for individuals with a credit card. That’s an increase from $6,040 in 2018.

Credit card use

  • Number of Americans who actively use credit cards: 184 million as of 2019, according to TransUnion.
  • Number of Americans who carry credit card debt month to month: 77 million.
    • We estimate 42% of active card users carry debt month to month, based on the Fed’s Survey of Consumer Finances.

Credit card debt

  • Total credit card debt in the U.S. (not paid in full each month): $687 billion
  • Average APR: 16.61% (also excludes those with a 0% promotional rate for a balance transfer or purchases). This estimate comes from the Federal Reserve’s monthly reporting of APRs on accounts assessed interest by banks.

The above estimates only include the credit card balances of those who carry credit card debt from month to month — they exclude balances of those who pay in full each month.

Credit card balances

  • Total credit card balances: $1.05 trillion as of February 2020, an increase of 3.3% from February 2019. This includes credit and retail cards, and a small amount of overdraft line of credit balances.
  • Average number of credit cards per consumer: 3.1, according to Experian. This doesn’t include an average of 2.5 retail credit cards.
  • Average credit card balance: $6,194. The average consumer has $1,155 in balances on retail cards.

The above figures include the credit card statement balances of all credit card users, including those who pay their bill in full each month.

Who pays off their credit card bills?

In 2019, fewer accounts were paid in full than accounts with a balance carried from month to month. According to the American Bankers Association:

  • Revolvers (carry debt month to month): 43.2% of credit card accounts
  • Transactors (use card, but pay in full): 31.1% of credit card accounts
  • Dormant (have a card, but don’t use it actively): 25.6% of credit card accounts

Delinquency rates

Delinquency rates peaked in 2009 at nearly 7%, but in 2019 delinquency rates were 2.6%, historically well below the long-term average.

Credit card debt becomes delinquent when a bank reports a missed payment to the major credit reporting bureaus. Banks typically don’t report a missed payment until a person is at least 30 days late in paying. When a consumer doesn’t pay for at least 90 days, the credit card balance becomes seriously delinquent. Banks are very likely to take a total loss on seriously delinquent balances.

Debt burden by income

Those with the highest credit card debts aren’t necessarily the most financially insecure. According to the 2016 Survey of Consumer Finances (the most recent data available), the top 10% of income earners who carried credit card debt had nearly twice as much debt than the average borrower.

However, people with lower incomes have more burdensome credit card debt loads. Consumers in the lowest earning quintile had an average credit card debt of $2,100. However, their debt-to-income ratio was 13.9%. On the high end, earners in the top decile had an average of $12,500 in credit card debt, though their debt-to-income ratio was just 4.8%.

A look at American incomes and credit card debt

Income percentileMedian incomeAverage credit card debtCredit card debt-to-income ratio
0%-20%$15,100$2,10013.9%
20%-40%$31,400$3,80012.1%
40%-60%$52,700$4,4008.3%
60%-80%$86,100$6,8007.9%
80%-90%$136,000$8,7006.4%
90%-100%$260,200$12,5004.8%

Source: 2016 Survey of Consumer Finances data

Although high-income earners have more manageable credit card debt loads on average, they aren’t taking steps to pay off the debt faster than lower-income debt carriers. If an economic recession leads to job losses at all wage levels, we could see high levels of credit card debt in default.

Generational differences in credit card use

In Q2 2019, Generation X cardholders had the highest credit card balances. The average cardholder from this generation had a balance of $8,215, according to Experian. Baby boomers held an average balance of $6,949, comparatively.

At the other end of the spectrum, millennials — who are often characterized as frivolous spenders — held significantly lower credit card balances, at $4,889. They also carry fewer (3.2) of credit cards in their wallets. Generation X carry 4.3 credit cards and baby boomers have 4.8 credit cards, on average.

How does your state compare?

Using data from Experian, as well as data from the Federal Reserve Bank of New York Consumer Credit Panel and Equifax, you can compare average credit card balances by state.

Differences in credit card debt by generation

In 2019, Generation X had more credit card debt, on average, than baby boomers, as those in their mid-40s typically have the largest amount of expenses relative to both younger and older consumers.

Methodology

In February 2020, MagnifyMoney collected and analyzed credit card data from government and industry sources, including the American Bankers Association, Federal Reserve, the Federal Deposit Insurance Corp., Experian, TransUnion and Equifax, to determine average credit card balances, interest rates, usage and delinquency rates.

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