What Is The Average Credit Card Debt Of Americans?

by Samantha Bennet on 2013/01/22

With the New Year underway the results are in and they show that Americans are deep in debt. The average credit card debt has risen, even with the apparent warning signs in the last few years and those problems that the government continues to face. The impacts of this debt are profound and long-lasting.

What Is the Average US Credit Card Debt?

There are different ways to calculate credit card debt in the United States. If you simply divide the total debt by the number of Americans, you get a surprising $7,194 per person. Shockingly, this number includes even those who have no debt whatsoever.

When you reduce the number of people included in this average to just those households that actually have such debts, the issue worsens.

Looked at this way, the average household in the US owes more than $15,000 to various credit card companies. When you add it all up, the total of such debt for everyone in the US comes to more than $850 billion. This makes the debt market for credit cards the third largest, surpassed only by mortgage debt and student loan debt.

Impact of This Debt

Debt is not necessarily bad news. As you may have heard before, some debt is good. A little debt allows you to build a record showing that you can be trusted to make payments on time and in full. And it is often worth the interest rate to acquire some things in life, such as houses and cars. (See our tips on How to Find the Best Credit Card Rates here.)

However, there are many more negative consequences of debt. People often use their credit cards to buy things that are normally out of their price range but have just slipped into their reach because of a deal or a discount.

The problem with this thinking is that they will end up paying more in the long run than if they had just saved their money and bought the item at the original price.

Interest rates, more than the total amount of debt, are the real problem for many people in debt. The average interest rate on these debts in the United States runs anywhere from the mid-teens to low twenties.

When people only pay the minimum every month, it can take years to pay this debt off.(See our Credit Card Payment Calculator to see how long it will take to payoff your debt.) In the meantime, each month they lose money servicing this debt.

Possible Solutions to Credit Card Debt

There are many ways for people to escape this problem. The households of the US could lower the average credit card debt considerably if they all paid more than the minimum each month.

Every incremental increase in monthly payments drastically reduces the total amount of time it takes to pay off credit card debt.

A number of companies are available to help people negotiate with their credit card companies,settle their credit card debt and start rebuilding their credit. Possible resolutions from these negotiations include lowered interest rates and reduced principals. Finally, as a last resort, some people consider Chapter 7 or Chapter 13 bankruptcy to erase their credit card debt and start over.

Next read Will the Mortgage Rates Go Any Lower in 2013?

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