The Average Credit Card Balance for a U.S. Citizen
Credit cards allow you to buy now and pay later, an activity that is very popular with millions of people. The problem is that, the longer you wait to pay, the more you pay. Excessive credit card use can and does lead to serious financial problems for people who spend beyond their means, and the high interest rates on credit cards make these financial problems worse.
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Average Debt
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Reliable credit card statistics are notoriously difficult to come by. A common statistic is that the average credit card debt for a U.S. household is $8,000. However, there are a couple of problems with this statistic. First, credit cards are issued to individuals, not to households, so this makes this statistic somewhat unreliable to begin with. Second, there is a relatively small population of individuals with astronomical credit card debts, a fact that skews the averages quite badly, and gives the impression of a widespread credit card debt crisis when this isn't necessarily the case.
What Credit Cards Are Used For
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Many people use credit cards in lieu of cash rather than as a means of postponing payment for something. This helps to keep your credit rating strong, and is also very useful, and in some cases required, in online transactions. Credit cards are used for nearly anything that can be bought and sold, from sensible household purchases to extravagant indulgences that can't be paid for within someone's budget. It is the latter category that makes the news stories.
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Interest Rates
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Carrying a balance on a credit card is more damaging to a budget than maintaining a mortgage or a car loan because credit card interest rates are substantially higher than interest rates for other loans. Even in a recession economy where mortgage interest rates are hovering around 5 percent, credit card interest is still north of 10 percent in most cases.
Lowering Credit Card Debt
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An industry has grown around the question of how to lower or eliminate credit card debt, but the answer doesn't really require a consultant. Live frugally, eliminate unnecessary expenditures, and (often the hardest part), make enough money to cover your necessities. Young people just starting out are the most important population to inculcate with lessons about responsible spending, because they don't yet have a mountain of debt to dispense with.
Total Credit Card Debt in America
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In 2009, American consumer debt totaled around $2.5 trillion. While not all of this was credit card debt, it gives some idea of the cumulative effect that debt can have on an economy.
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References
- Photo Credit credit card and hand image by Warren Millar from Fotolia.com
