Lucia Dunn, professor of economics, is co-author of new study finding that younger Americans not only take on relatively more credit card debt than their elders, but they are also paying it off at a slower rate. The findings suggest that younger generations may continue to add credit card debt into their 70s, and die still owing money on their cards.

Dunn and her co-author, Sarah Jiang of Capital One Financial in McLean, Virginia, found that a person born between 1980 and 1984 has credit card debt substantially higher than debt held by the previous two generations: on average $5,689 higher than his or her “parents” (people born 1950-1954) at the same stage of life and $8,156 higher than his or her “grandparents” (people born 1920 to 1924).

This study is significant because it is the first to use data on not only how much people borrow on their credit card, but their complete payoff information as well.

The researchers suggest one solution to the impending problem is to raise the minimum required payments each month. The study's findings showed that increasing the minimum payment by 1 percentage point increased the average payoff rate by 1.9 percentage points. That would mean, when paying only the 2 percent minimum payment each month on a balance of $1,000 at an interest rate of 19 percent, it would take more than eight years to repay the balance in full. That's compared to less than two years when paying a monthly payment of 5.8 percent.

"Raising the minimum payoff rate can have a powerful effect on how people actually pay off their credit card debt, much more so than you might expect," Dunn said.

Dunn said that an increase in the minimum payoff rate may give a psychological jolt to cardholders.

The study will appear in the January 2013 issue of the journal Economic Inquiry.

Read the entire press release, written by Jeff Grabmeier, director, Office of Research and Communications.