Elon Musk Warns People's Credit Card Debt Is 'Scary' — Americans Now Owe Record-Breaking $1 Trillion To Credit Card Companies

The United States is grappling with a surge in credit card debt, and even the world's wealthiest person Elon Musk has voiced his concerns about the issue. 

During Tesla Inc.'s second-quarter 2023 financial earnings call, Musk said the current state of credit card debt is genuinely concerning.

During the call, Musk said, "For a lot of people, they're just really breaking even every month. In fact, if you look at the rise in credit card debt, they are, in fact, not breaking even every month, like credit card debt is — is looking kind of scary."

And he is right. According to data from the Federal Reserve, total credit card debt in the U.S. crossed the $1 trillion mark on July 26 and continues to rise. This surge in debt comes as Americans spend far beyond their means, exacerbating the boom-bust cycle of the pandemic economic recovery.

Don't Miss:

• Until 2016 it was illegal for retail investors to invest in high-growth startups. Thanks to changes in federal law, this Kevin O'Leary-Backed Startup Lets You Become a Venture Capitalist With $100
• Airbnb was worth $47 billion at IPO. This New ‘Airbnb For RV's' Platform Takes On $540 Million RV Rental Market With 25% In Savings And $50,000 For Renters. is open for anyone to invest.

Credit card debt reached unprecedented levels this summer, with total balances surging by $193.4 billion and surpassing the lowest level seen during the pandemic by $264 billion. The rise in debt has been accompanied by soaring interest rates on credit cards, which are near 40-year highs.

Younger generations — Gen Z, and millennials — have experienced a notable increase in credit card debt. According to Credit Karma data, Gen Z  has an average balance of $2,781, an increase of 7.4% from last year. Millennials owe $5,898, an increase of 6% from 2022. These figures coincide with dwindling savings and the depletion of pandemic-era financial cushions. With many consumers barely breaking even, the increasing importance of a balanced portfolio and building alternative revenue streams is becoming increasingly vital.

To stay updated with top startup news & investments, sign up for Benzinga's Startup Investing & Equity Crowdfunding Newsletter

Once student loan payments resume in October, things may get even worse. The Consumer Financial Protection Bureau found that nearly 8% of borrowers have already fallen behind on other payments. After a three-year hiatus from loan payments, many people may find it difficult to allocate the necessary funds in their budgets, according to VantageScore President and CEO Silvio Tavares.

The financial strain is evident as cash balances in checking and savings accounts among around 9 million Chase customers have hit their lowest levels since April 2020, according to data from the JP Morgan Chase Institute.

Musk is well aware of the dangers of debt in turbulent macroeconomic conditions and previously has issued warnings about this matter. Musk's company X Corp. faced debt of $12.5 billion to complete the purchase of Twitter Inc. in October. The interest payments on the debt amount to hundreds of millions of dollars per quarter. Bloomberg reported he's made two separate payments of $300 million each just in interest so far this year.

Despite the magnitude of his own debt obligations, Musk remains concerned about the broader implications of excessive credit card debt on individuals and the economy as a whole.

See more on startup investing from Benzinga:

• Don't just buy from your favorite brands, own them so you own the upside. Learn how Retail Investors Are Taking Stakes In Their Favorite Startups To Own The Upside
• Gamers are selling their old gaming items for millions. Learn why everyday gamers and investors are claiming a stake in their side hustles and how they invested over $1.2 million in this startup