Americans across the board are struggling with credit card debt. Those just starting out are particularly vulnerable.
With limited financial resources, lower wages and shorter credit histories, young adults are struggling to manage high-interest debt more than other age group, according to a new report by Urban Institute. Nearly one in five adults between the ages 18 and 24 with a credit record in the U.S. currently have debt in collections.
"Young adults are particularly vulnerable," the authors of the report wrote. "The high cost of borrowing coupled with limited income makes it difficult to manage debt in this stage of life."
Overall, credit card balances are surging, up 15% in the most recent quarter, the largest annual jump in more than 20 years. At the same time, credit card rates are now over 19%, on average — an all-time high — and still rising.
But for new applicants for credit, APRs are typically even higher, as much as 30%, according to Ted Rossman, senior industry analyst at Bankrate and CreditCards.com.
"When you have poorer credit, you have to pay more to borrow, which can make taking on debt even harder to pay back," said Kassandra Martinchek, a research associate at Urban Institute and co-author of the report.
"Because young adults have this unique vulnerability, it's easier for a financial shock to happen and throw you off your path," Martinchek added.