Newton’s first law of inertia is that objects in motion tend to stay in motion and objects in inertia tend to stay in inertia. Based on data analyzed by the Consumer Financial Protection Bureau, the same can be said for individuals with credit card debt. They tend to stay in debt.
Among those with active credit card accounts, two-thirds carry a balance every month and do not fully pay off their debts, according to the CFPB’s analysis, which looked at the credit card portfolios of banks between 2008 and 2016. The data covered about 85% of all credit card accounts in the United States, according to the CFPB.
As can be expected, there is a correlation between a borrower’s credit score and the likelihood that he or she will carry a balance on a credit card account from one month to the next — those with lower credit scores were more likely not to pay off their balances. On average, borrowers with prime credit scores — those above 660 — carried balances for an average of nine months, while those with subprime credit scores carried balances for an average of 13 months.
For those in the credit and collection industry, individuals who carry a balance on their accounts from month to month are more likely to end up in collection. The fact that there is such a large number of individuals who carry a balance on their cards is yet another sign that the economy is not hitting on all cylinders for everyone.