Yet again, The Washington Post is not letting facts get in the way of a good story. This time, under the headline “Credit card debt tops $1 trillion, trapping even six-figure earners” they spin a yarn of high-earners keeping their credit card debt for years as “pet rocks”, not having the discipline to pay them off even as the economy is recovering.
Bankrate found that 72 percent of cardholders with credit card debt and annual household incomes of $100,000 or more have been in debt for at least a year. The percentage drops to 70 percent for households with credit card debt and incomes between $80,000 and $99,999; 63 percent for people earning between $50,000 and $79,999; and 53 percent for folks making under $50,000.
But what do they mean by “credit card debt”?
“More people [are] carrying more debt for longer periods of time,” Ted Rossman, a senior industry analyst at Bankrate, said. “The stats that we see from the New York Fed and elsewhere, they don’t distinguish typically between what’s paid in full at the end of the month and what’s not.”
The emphasis is mine, and to be clear this is the gist of their story: more households with incomes >$100,000 carry a balance than those who earn less. But why wouldn’t they? Between credit card rewards (cash back, travel points, etc.) incentivizing use even for daily purchases on one end, and the current ≥4% annual yield on low-risk high-interest savings accounts on the other, why wouldn’t high-earning and — let’s speculate — more financially literate households hold off from paying off the balance to $0 and earn 4% interest on what they held off from paying? There is an important distinction between paying off the balance and paying down to zero which the article never makes.
So, how many households have a revolving credit card balance, the one that actually charges interest? The article has some of that information, burried in the lead and with no context:
Overall, nearly half (47 percent) of credit cardholders have revolving debt, meaning they don’t pay off their balance in full.
They, of course, omit the most important part of the story: proportion of households paying of their balance grouped by income. Because — and I’ll speculate some more — there are two stories here, one of lower-income households saddled with debt that’s not a pet rock but a rock tied to their neck, paying off just enough to stay afloat; and the other of some (many? who knows — they didn’t give that data) higher-income households playing the credit card game, which would account for the first quoted paragraph.
James Fallows had a good story about framing in journalism and this is not a direct example — the boo boos are in the story itself, not the headline and positioning — but it rhymes. Spin it in a way that sells, I guess. Simplify to the point of enough ambiguity to support your preordained, attention-grabbing conclusion. Vague phrases and undefined terms, FTW.