Credit cards help us reach our goals and accomplish our dreams when used wisely, and as a country, America loves its credit cards. Unfortunately, as the average credit card debt in the United States continues to rise, we face an ever-growing, collective mountain of debt. From tuition to healthcare to handbags, individuals and households take on credit card debt for many different reasons. But one fact applies to us all: in 2018, the average credit card debt of US card-holders is expected to rise, and unless you take steps to lower your own debt burden, you could fall victim to the negative effects.
Credit Card Debt From 2000 – 2017
In 2000, more than half of American households had credit card debt, with the total credit card debt balance at $688 billion. Over the next decade and a half, credit card debt in the United States would rise and fall, but climb steadily over time, finally topping the $1 trillion mark in 2017.
Average Credit Card Debt in 2017
Credit card debt in the United States in 2017 was higher than ever, but that doesn’t necessarily mean we’re on the verge of another financial crisis. During the crisis of 2008, the amount of credit card debt carried from month to month was higher than it was in 2017 and going into 2018, although the average credit card debt is in fact increasing. The credit card debt-to-income ratio has also seen a decrease over recent years. This signifies greater financial health today than during historical financial lows in the US, even though our debt number appears significantly higher upon first glance.
Finding the Average
There are different ways of calculating the average credit card debt of each American. One way is to add up the total credit card debt and divide by the total number of adult residents. But not all American adults hold credit cards and households with zero debt can skew the overall numbers.
The most effective, if not always precise, method is to find the average credit card debt of only card-holding American households and individuals.
Breaking Down the Numbers
At the end of 2017, there were
- 326 million individual adults living in the United States, or
- 126 million registered households.
In total, these 326 million people carried a record $1.023 trillion in credit card debt.
A survey by MagnifyMoney.com discovered that, as of the end of 2017,
- About 201 million Americans use credit cards
- About 125 million of those card-holders carry a debt.
This means that
- Card-carrying adults in the US carry an average of $5,089 in credit card debt ($1.023t % 201m).
- Of card-holders who carry a debt month over month, the average is $8,184 ($1.023t % 125m).
Why the Average Credit Card Debt Continues to Increase
America is a country in debt, according to the numbers and reports, and on an individual basis, debt isn’t always a bad thing. However, with the national credit card debt reaching over $1 trillion, underlying causes must be evaluated. Two of these factors are the gap between income and living expenses, and subprime lending practices.
Wages vs Cost of Living
The single biggest cause of credit card debt continuing to creep upwards is the failure for wages to keep up with the increasing cost of living year after year. According to calculations by Investopedia, the dollar today buys less than it did 20 years ago (after adjusting for inflation). Too many people in the USA are living paycheck to paycheck, and that needs to end.
Many working Americans put in full-time hours and still don’t have the money they need to pay for basics like food, gas, rent, and utilities. When they come up short, many turn to credit cards to make up the difference.
As America’s debt climbed higher in the 2000s, lenders began increasing their practice of distributing loans to borrowers with low credit scores, at drastically higher interest rates. These aggressive lending practices (both in the auto and housing loan industries) contributed to a dramatic increase in repossessions and delinquencies. As the average overall debt increased because of subprime lending, more Americans turned to credit cards to pay for everyday expenses, often increasing their debt even further.
Average US Credit Score
Although the average credit card debt in the United States keeps increasing, there is some good news: For the very first time, more Americans have very high (Super Prime) Vantage credit scores than have very low (Deep Subprime) credit scores. In 2017, 22.3% of Americans had super prime Vantage scores, while 21.2% had deep subprime scores.
While Americans have more credit card debt than ever before, that isn’t always a bad thing when it comes to credit scores. Carrying a credit card debt can serve to increase your credit score, as long as you continue to make payments on time, every month. In fact, paying off your credit card balance in full at the end of each month has no benefit to your credit score (although it doesn’t negatively impact it, either) and it’s better for your credit to use a credit card now and then.
How Much Credit Card Debt is Acceptable?
The amount of credit card debt that’s acceptable for you depends on how you use yours and how you pay it off.
Revolvers and Transactors
There are two types of credit card holders: revolvers and transactors.
A revolver is a credit card holder who carries credit card debt from month to month, accruing interest and increasing debt.
A transactor is a credit card holder who pays of their total credit card balance at the end of each month, never accruing interest.
As a rule, you’ll save money by being a transactor, but this isn’t always necessary, possible, or even the best option for every cardholder. Some prefer to make payments each month but not pay off the full amount, accruing a small amount of interest but benefiting from the additional time to pay.
Is It Better to Carry a Balance?
A common misconception when it comes to credit cards is that it’s better for your credit score to carry a balance (to be a revolver, rather than a transactor). Of course, it’s harder on your wallet to do this, since you’ll accrue interest on that balance each month until you pay it off in full. But it also isn’t true that it’s better for your credit score.
Simply put, your credit score will benefit from your using your credit card (in small amounts, not all the way up to the limit). This is true whether you pay that balance off each week, at the end of each month when you get your statement, or over the course of several months.
Signs You Have Too Much Credit Card Debt
While some amount of debt is fine—and sometimes even healthy, if it helps you accomplish your goals—there are some surefire signs that you’re carrying too much credit card debt:
- You’re constantly stressed
If you think about your credit card debt every day and feel panicked, that is a sign it’s negatively affecting your quality of life
- Your debt isn’t going down
If you’re making payments towards your credit card debt every month, but the balance isn’t decreasing (or it’s decreasing very slowly), you likely need to create a more strategic plan for paying down that debt. This can occur when you’re only making minimum payments.
- You’ve reached the limit on one or more cards
Carrying a balance on a credit card isn’t always a bad thing if you know the financial impact it will have and balance that against the benefits. However, reaching the limit on your credit card almost never provides any benefit, either to your wallet or to your credit score.
- Your total debt-to-income ratio isn’t good
Generally speaking, a total debt-to-income ratio of 15% or less is ideal. If yours is above 50%, your debt is considered high-risk. This includes all sources of debt (mortgages, credit cards, auto loans, student loans, etc.). If you think your credit card debt is too much, it might be time to create a budget to help get your finances under control. If budgeting doesn’t work, you can take more drastic actions and aggressively try to reduce your credit card debt with these 6 methods.
Will the Average Credit Card Debt Increase in 2018?
Based on the most recent figures from 2017 the prior years, the average credit card debt of US card-holders will likely continue to increase throughout 2018, for the fifth consecutive year. More consumers have access to credit cards than ever, and many cardholders with higher credit scores will see their limits increased. To avoid the potential pitfalls of credit card debt, make sure you have a plan going into the second quarter of 2018.
Compare the Best Student Loan Refinance Rates
Here are our top student loan refinance picks for 2019
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Student Debt Relief Loan Refinancing Advertiser Disclosure
College Ave: College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
College Ave Refi Education loans are not currently available to residents of Maine.
1 – The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation.
2 – $5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. Information advertised valid as of 04/26/2019. Variable interest rates may increase after consummation.
3 – This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
ELFI: Subject to credit approval. Terms and conditions apply. To qualify for refinancing or student loans consolidation through ELFI, you must have at least $15,000 in student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary institution.
LendKey: Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
CommonBond: Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate.
Splash Financial: Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval.com
Earnest: To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest’s fixed-rate loan rates range from 3.89% APR (with autopay) to 7.89% APR (with autopay). Variable rate loan rates range from 2.50% APR (with autopay) to 7.27% APR (with autopay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms of 10 years or less. For loan terms of 10 to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 0.26% and 5.03% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 23, 2019 and are subject to change based on market conditions and borrower eligibility.
Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/23/19. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at firstname.lastname@example.org, or call 888-601-2801 for more information on our student loan refinance product.