Here’s how many Americans have more money in emergency savings than credit card debt

Successful saving and budgeting “is all about the habit.”


The pandemic left millions of Americans cash-strapped and wondering how to ration their next paycheck. With bills piling up and so many people out of work, it may seem plausible that adults owed more money in credit card debt than they had set aside in emergency savings.

But new data shows the opposite: A total of 54% of Americans polled in Bankrate's February Financial Security survey said they had more money in an emergency fund than due on a credit card. That's up 5 percentage points from a pre-pandemic survey and the highest rate since 2018.

"As devastating as the pandemic has been to the finances of those that are unemployed or have suffered income disruptions, for many millions of others it has actually been an opportunity to pad savings in a way that they've been unable to in previous years," says Greg McBride, chief financial analyst for Bankrate. "Many of those fortunate enough to be working from home, earning the same income but not spending to the same extent because of lockdowns and social distancing, have added to their savings in a material way."

Americans are making smart money moves

Many Americans are saving more than ever. The personal savings rate, or percentage of disposable income people save, soared to 33% last April. It's since dropped to 13%, per data from the U.S. Bureau of Economic Analysis, but is still higher than it has been in 4 decades

Just over a quarter of Americans, 27%, meanwhile, report having more credit card debt than money in an emergency fund. That's down 1% compared to the same time a year before.

While saving is a top priority for Americans, overall, more than a third of millennials, 37%, still said their credit card debt exceeded their emergency fund balance. That's compared to 31% of Gen Xers and 18% of baby boomers who said the same.

Americans' average credit card debt is $5,315, according to a 2020 Experian review.

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The Bankrate research found some correlation between income and savings. Slightly less than half, 45%, of those with an income less than $30,000 had more emergency savings than credit card debt. That number shoots up to 70% for households with income above $75,000.

As income increases, so does the likelihood of having more in emergency savings than credit card debt. That finding was true across every demographic group.

Save or pay down credit card debt first?

The Covid crisis proved that even with outstanding credit card debt, it's crucial to build an emergency fund to keep yourself afloat in case of an unexpected expense. Nearly 50% of respondents said they've run out of emergency savings, according to a survey from research firm Highland in October. Over 80% weren't able to cover a surprise $500 expense.

More than two-thirds, 63%, of adults in the survey said they had been living paycheck-to-paycheck for almost a year, while half, 53%, said they were not living that way before the pandemic.

"While the ideal state is to have a sufficient emergency savings cushion and zero credit card debt, the reality is that it often takes years to get there," McBride says. "Regularly contributing to, and building, your emergency savings while focusing on paying off credit card debt are markings on the pathway to future financial security."

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Recently, MagnifyMoney led a separate survey of more than 1,000 U.S. adults in December and found that 43% of consumers with emergency funds tapped into them in the pandemic.

A lack of savings doesn't leave much financial "wiggle room," Marguerita Cheng, a CFP and the CEO of Blue Ocean Global Wealth, told Grow. "It is challenging because they may not have the safety net. Cash reserves or emergency funds are important for any emergencies."

How to prioritize your paycheck

It's important to set money aside in case you need it, experts say, especially now. Many Americans are doing that: When asked to choose between boosting their emergency fund or paying down credit card debt, 52% of Americans chose saving versus 32% who picked debt, according to Bankrate.

Money advisors generally recommended putting at least 3 to 6 months' worth of living expenses toward an emergency account. Financial expert Suze Orman recently told Grow the pandemic has shown aiming to save a year's worth could be even smarter.

Since saving can be a lot harder in the current climate, it helps to aim for bite-size goals. Having even $1,000 is a start, and stashing away $3,500 is great, considering that's about the typical cost of an emergency, according to Bankrate.

Pay yourself first, experts recommend. With any extra income you have or windfall you may come into, consider setting up automatic transfers to ensure you're regularly contributing a portion to your goal, and that you're doing so in a high-yield savings account.

"Successful saving is all about the habit," McBride says. He suggests establishing that habit by setting up direct deposit from your paycheck into a dedicated savings account. "For gig workers or the self-employed that don't get regular paychecks, set up an automatic monthly transfer from your checking account into savings. Automating your savings and paying yourself first are key."

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