Nearly One in Four Americans With Credit Have Debt in Collections

Rising grocery and other essential costs can push households to rely on credit cards, but high interest rates can make balances hard to reduce even when borrowers pay regularly. Susan Cannon, 73, told Business Insider earlier this year that she owes nearly $40,000 across 19 cards, with interest rates ranging from roughly 12% to 35%. She lives in a mobile home in rural Texas and continues to charge groceries and gas while paying more than the minimum due.

“I can’t get the balance down because I am still having to use credit cards at the end of the month to get groceries and gas,” Cannon told the publication. She said interest charges keep her balance rising despite paying her bills, leaving her payments going toward interest rather than savings. “I just cannot get ahead,” she said.

The burden varies considerably by place. In rural Jim Hogg County in South Texas, more than half of residents with a credit history have debt in collections—more than twice the national share of 23.5%, according to the report.

The time before an unpaid bill reaches collections depends on the type of debt. Credit card accounts typically enter collections four to six months after a missed payment; unpaid medical bills generally take three to six months. The analysis found median delinquent balances of $680 for credit cards and $1,492 for medical debt. Federal student loans generally enter default after 270 days without payment, though borrowers may use options such as rehabilitation to resolve a default and restore a loan to good standing. The New York Federal Reserve said Americans collectively owed $18.8 trillion in debt in the second quarter of the year.