Finding a sustainable financial plan in America may be tasking because you have a lot on your list. As a result, borrowing comes into the picture. Consequently, debt becomes a norm in the American Lifestyle. Having a credit card debt is not a stigma; you are probably as indebted as the next guy. While it is important to access fundamental needs, debt is quite risky and even expensive. Borrowing requires interests, prompt payments to keep your credit score, and a bit of rush to keep up.
While it is not unusual to make mistakes when borrowing, knowledge keeps you in check. Keep reading for data from credit sources in order to see the bigger picture.
WHAT IS CREDIT CARD DEBT?
Credit card debt is one of the fastest-growing types of debt in the US. In 2019, consumers in America had a total of $4.2 trillion attributed to debts. The average American has $90,460 in all types of consumer debt products, credit card, personal loans, mortgages, and student loans.
Credit card debt is a part of your credit card balance that is not paid off. It is usually called a revolving debt because you can carry a debit balance alongside a predetermined credit limit. As a result, there are variable interest rates, while payments are calculated as a percentage of your unpaid balance.
Thousands of Americans carry credit debts. According to Experian consumer credit report, Americans have an average of $6,194 in credit card debt. That is in addition to the fact that U.S. credit debt reached a $930 billion high in the last quarter of 2019. This is not surprising, especially when people carry a high-interest credit card. The median debt balance per family was reported to be $2,700, while the average balance for consumers was $5,315. True, some of these debts are held on joint cards; therefore, they may be counted twice.
AVERAGE CREDIT CARD DEBT – KEY FINDINGS
- After a turbulent 2020, studies show that credit balances dropped low when many people experienced financial turmoil. Nevertheless, the average household income increased.
- The average credit card debt is $6,194, and Alaskans hold the highest credit card balance, an average of $8,026.
- Iowans have the lowest balance- an average of $4,774.
- Following reports and recent data from the Federal Reserve’s Survey of Consumer Finances, U.S. families record $6.270 in credit card debts. This is based on reliable data representing credit card indebtedness in America.
AVERAGE CREDIT CARD DEBT BY AGE GROUP
- Gen Z (18-23) $9,593
- Millennials (24-39) $78,396
- Gen X (40-55) $135,841
- Baby Boomers (56-74) $96,984
- Silent Generation (75 and above) $40,925
According to Experian reports, people in the two oldest age groups have recorded a significant decrease in debts since 2015. That is about -7.5% and -7.7% for baby boomers and silent generation, respectively. On the contrary, Millennials hold the largest increase in debt since 2015. In the same year, the average millennial had $49,722. By 2019, the number reached a whopping $78,396, making a 58% increase.
CAUSES OF CREDIT CARD DEBT
Debts are often a cumulative result of careless spending, shopping, and other contributing factors. Nonetheless, many people are in debt because they cannot cover the costs of their basic needs.
- Medical Bills- unexpected medical bills and unavoidable health costs.
- Daily expenses- certain people cannot cover their daily living costs, so they need to borrow to pay bills, buy groceries and sort other pertinent expenses.
- Repairs- this ranges from a leaky pipe to a damaged roof and even your car breaking down. Repairing them is not something you prepare. Hence, you pull out the credit card if there is no emergency fund.
- Interest charges- this is a prevalent cause of credit card debt of average Americans. Interests build as people carry balances on their cards. The BALANCE’ 2020 report shows that the credit card interest rate stood at 20.09%. Therefore, families in the United States had around $1,250 in credit card charges for the year.
CREDIT CARD DEBT AND CREDIT SCORES
People with good account standing may not have a lower credit score. Therefore, a credit card debt is not equal to a lower credit score. Some of the factors affecting a credit score include payment history, length of credit card use, percentage spending limit, credit mix, and the number of new credit accounts. Generally, using less than 30% of your credit limit is advisable so that your credit score is not affected negatively.