CHICAGO, IL--(Marketwired - Oct 28, 2014) -
- Nearly half say that paying off their bills every month is a major concern
- Illinois millennials have $17,000 more in student debt than the national average
- BMO Economics: U.S. credit card debt coming down from 2008 peak
A survey released today by BMO Harris Bank found that when making monthly credit card payments, millennials (those ages 18-34) in Illinois lag behind older cohorts. Only 33 percent say they always pay off their credit card balance compared to 39 percent of those 35-54 years and 53 percent among those 55 or older.
Furthermore, 36 percent say paying their credit card bill is a major financial concern and paying bills overall is a concern for half (49 percent) of respondents.
The survey found a number of other age-related gaps in Illinois:
- One in five millennials (19 percent) said they always carry a credit card balance. This number is higher among those 35-54 years (25 percent) and goes down for those 55+ (14 percent)
- Just under two thirds (63 percent) of millennials say they always pay their bills (other than credit cards) on time; three quarters of those aged 35-54 always pay their bills on time, and 80 percent of those aged 55+ do so
"Young people have a lot on their mind with financial issues, and we can see from our survey that credit cards are contributing to that in some ways," said Julie Curran, Regional President, Chicago, BMO Harris Bank. "Credit can be helpful, or even necessary, when making a major purchase. It's also important to think about the benefits of using a credit card to build your credit. However, spending beyond your ability to pay can be a slippery slope. We recommend paying more than the minimum due each month and keeping overall usage to below 60 percent of your credit limit."
Illinois residents were also asked about their financial concerns, from current loans to saving for retirement. Not surprisingly, millennials were more likely than older respondents to say student debt was a financial issue in their life, with 40 percent citing is as a major concern. On average, millennials in Illinois said they carry $55,359 of student debt; this compares to a national average of $37,988.
Young Illinoisans were more likely, compared to older cohorts, in many cases to say they considered a number of other issues to be a major financial concern:
||55 years +
|Paying off credit card debt
|Paying bills on time
|Not having enough savings for future purchases (e.g. house or car)
|Paying down a mortgage
|Saving for a child's education
|Saving for retirement
"In the wake of the Great Recession, consumers have been using credit cards more cautiously, despite this method of payment remaining as flexible and convenient as before. Consumers are now much more aware that credit card loans tend to be more expensive than other forms of borrowing and escalating loan balances can quickly sneak up on you. In turn, consumers are paying off their card balances more determinedly and drawing down less of their credit limits, one of the paths to improved personal credit ratings," said Michael Gregory, Head of U.S. Economics, BMO Capital Markets.
"According to the Federal Reserve Bank of New York, through the first half of 2014, the number of credit card accounts increased 1.7% and the credit limit on total cards outstanding grew 1.2%. However, credit card balances have actually decreased 2.0% so far this year, an indication that consumers are employing their credit cards more cautiously."
BMO Harris offers the following tips for minimizing credit card debt:
Don't create more debt: To start reducing debt, you need to put your credit cards away. Even small purchases add up; if you don't pay off your balance in full every month, you could end up paying thousands of dollars extra for these necessities. Instead of using credit, try paying for things with cash or a debit card.
Pay more than the minimum payment. It may not seem like much, but paying just $25 more toward your debt each month can make a huge difference in the amount of interest you'll pay over time. By increasing your monthly payments by just a small amount, you'll pay down your debt faster and significantly reduce the amount you'll pay in interest. You'll also free up your available credit, which can improve your credit score. By boosting your credit score, you'll become eligible for better interest rates on loans, helping you save even more in the long run.
Consolidate your debt. Consolidating your credit card debt into a home equity line of credit can save you in the interest in the long run, plus you'll have the added convenience of making only one monthly payment, instead of paying several bills each month.
Talk to a financial professional. Facing debt can be an emotional task, but getting unbiased advice can help. A BMO Harris banker can help you review your situation and create a priority payoff plan based on which debt has the highest interest rate. As your debt begins to shrink, consider using the cash you've freed up to open a savings account so you can break the cycle of using your credit card to fund your expenses.
Survey results cited in this report are from interviews with an online sample of 1,004 Americans conducted by Pollara between July 2nd and July 4th, 2014. The margin of error for a probability sample of this size is ± 3.1%, 19 times out of 20.
About BMO Harris Bank
BMO Harris Bank provides a broad range of personal banking products and solutions through more than 600 branches and approximately 1,300 ATMs in Illinois, Wisconsin, Indiana, Kansas, Missouri, Minnesota, Arizona and Florida. BMO Harris Bank's commercial banking team provides a combination of sector expertise, local knowledge and mid-market focus throughout the U.S. For more information about BMO Harris Bank, go to the company fact sheet. Banking products and services are provided by BMO Harris Bank N.A. and are subject to bank or credit approval. BMO Harris® and BMO Harris Bank® are trade names used by BMO Harris Bank N.A. Member FDIC. BMO Harris Bank is part of BMO Financial Group, a North American financial organization with approximately 1,600 branches, and CDN $586 billion in assets (as of July 31, 2014).