An increasing number of Americans now have more credit card debt than emergency savings, leaving them financially vulnerable in times of need.
According to a new survey from Bankrate, one-third of Americans now owe more on their credit cards than they have in emergency savings—an alarming trend that has worsened over the past decade.
While over half of those surveyed reported having more emergency savings than debt, and 13% had neither, Bankrate’s Chief Financial Analyst Greg McBride warned that Americans are still woefully underprepared for financial emergencies.
“Emergency savings has long been the Achilles’ heel of Americans’ personal finances,” McBride said.
Although inflation has cooled since its peak in 2022, giving some households the breathing room to rebuild their savings, rising living costs continue to strain household budgets. More Americans reported increasing their savings this past year than those who saw a decline, a positive sign, according to McBride. However, the gap between rising expenses and stagnant wages remains a significant challenge.
Millennials, defined by Bankrate as those between 29 and 44 years old, are struggling the most. The survey found that millennials are more likely than any other age group to have more credit card debt than emergency savings.
Money Management International (MMI), a nonprofit credit counseling agency, has seen this financial stress firsthand. Millennials now make up the largest share—43%—of new MMI clients, a shift that has surprised industry experts.
Kate Bulger, Vice President of Business Development at MMI, noted that for nearly two decades, their primary clients were older Americans in their 40s and 50s, many of whom had accumulated debt over a lifetime of expenses, such as sending children to college and preparing for retirement.
“This shift to this younger generation is really surprising for us,” Bulger said.
The root cause of millennial financial struggles, according to Bulger, is the rising cost of living outpacing wages. She pointed out that millennials are more likely to rent than own homes, and many are dedicating a larger share of their income to housing costs. MMI reports that the average millennial seeking financial counseling arrives with an unsecured debt balance of $30,000.
Despite the financial strain, Americans are taking different approaches to tackling their debt. Bankrate found that 35% of people are working on both saving and paying down debt simultaneously, 28% are prioritizing building emergency savings, and 24% are focusing on reducing their debt first.
McBride advised against an either-or approach, urging Americans to address both concerns simultaneously.
“Attack both at the same time,” he said. “It’s not an either-or proposition.”
His strategy includes setting up automatic transfers from paychecks into a dedicated savings account to build emergency funds while aggressively paying off high-interest debt. He also recommended exploring 0% balance-transfer credit cards, which can temporarily halt interest accumulation for up to 21 months, as well as seeking additional income sources or cutting unnecessary expenses.
For those feeling overwhelmed, Bulger suggested working with accredited financial counselors, like those at MMI, who can help assess budgets and create structured debt management plans.
Ultimately, the goal is to eliminate credit card debt and build an emergency fund that can cover at least six months’ worth of expenses. While that may seem like a daunting task, McBride highlighted that progress, no matter how small, is key.
“Successful saving is all about the habit,” he said.