The average household carries around $8,300 in credit card debt. This amount tends to scale upward with age, income and net worth. Young adults and households with low incomes are most likely to be saddled with high credit card debt. Inflation is also a major contributor to rising debt levels, wiping out the recent wage increases that have helped most people. As a result, low-income families are forced to cut back on expenses and take on additional debt to keep up with the rising costs.
Average household credit card debt is around $8,300
According to a study by Forbes, the average household balance for a U.S. household is around $8,300. While large cities with high costs of living tend to have the highest average credit card balances, smaller towns and rural areas may be more likely to avoid credit card debt altogether. Big cities are usually associated with big debts, with New York, Los Angeles, San Francisco and Fairbanks among the top cities for credit card debt per person.
The rise in credit card debt is an indication of a better economy, but the trend is also alarming. More people are using credit cards than ever before, and this is a concern for financial experts. According to the study, interest charges are a major cause of credit card debt. As of 2017, the average American household was paying around $1,300 a month in interest rates. With interest rates expected to rise further in the next few years, the average household credit card balance is likely to rise again.
While the number of people with credit card debt is increasing, the numbers for households with more than one card have decreased slightly. The average amount of debt per household was $5,199 in Q4 of 2017, $5,214 in Q4 of 2018, and $3,702 in Q4 of 2020. This trend is largely due to increased credit line balances.
The average credit card debt per household varies greatly, but it is estimated that households in the highest income percentile have an average debt of $12,600. In comparison, households in the lowest income percentile have an average balance of $6,900.
It scales upward with net worth
According to ValuePenguin, average household credit card debt scales up with net worth. Households with a net worth under $5,000 have an average credit card debt of $4,912, while those with a net worth of $500,000 or more have an average credit card debt of $8139. While the average household credit card debt is not as high as you might think, it is not a trivial amount either.
Net worth is the total value of a family’s assets minus its liabilities. Compared to income, wealth is more concentrated at the top. The survey found that the wealthiest 10% of households have net worths more than five times their annual income. In other words, higher net worth means more wealth.
It increases with income
Credit card debt levels in the U.S. tend to increase with income. The highest credit card balances are found among the middle-class and upper-middle-class, while the lowest are found among low-income families. American households with the highest levels of credit card debts include those in the 60th to 79th income percentile. The lowest average balances are found among people who identify with more than one race, and those in the lowest income percentile have less than half of the average amount of credit card debt.
Over the past decade, the share of households with credit card debt has increased significantly. In 2004, the average household held $2150 of credit card debt. This was up 6.2 percent from 2001 and 62.9 percent from 1989. In the same period, the percentage of low-income families with credit card debts increased by more than three times as fast as that of middle-income households.
Inflation has played a significant role in the rise of household credit card debts. During the ‘Great recession’, American households accumulated $870 billion in credit card debt. The rise in credit card debts made it difficult for many people to pay for rent and mortgages. As a result, according to CNN, 170,000 families were pushed to live in shelters.
The percentage of high-debt families paying more than 40 percent of their incomes was greater than that of families without children. The number of high-debt families increased from 13.5 percent in 1989 to 23.1 percent in 2004. Families with high credit card debts also had higher delinquency rates. During that time period, 9.9 percent of these families were 60 days or more behind on a single payment.
It increases with age
The average household carries debt in many ways, depending on age. The youngest household has less debt than the oldest, and the average credit card debt of households in their 30s is lower than that of older households. However, average household credit card debt tends to rise as household income increases. The highest income percentile households carry an average of $12,600 in credit card debt, while the lowest income percentile households carry a balance of only $6,900.
According to the Federal Reserve Survey of Consumer Finances, the average credit card debt in the U.S. increased by 6 percent since Q1 2021. Credit card debt totaled $841 billion in Q1 2022, down from $893 billion in Q1 2020 but up by $71 billion from Q1 2021. The average cardholder had $5,769 in debt, up from $4,035 in the previous quarter.
Nevertheless, household credit card debt isn’t increasing as fast as inflation. The cost of living in the U.S. continues to rise faster than household income, and a high credit card balance puts a strain on many Americans. According to a recent study conducted by NerdWallet, the average household credit card debt will reach $361 billion by June 2022, up from $361 billion a year ago.
Consumers in their 60s and 70s have more credit card debt than consumers in lower income groups. The average balance of those in their 60s is $6,832 compared to $5,139 in the previous quarter. Meanwhile, those in their 80s have an average credit card balance of $2,990. These are both up from the average Q2 2018.
Meanwhile, the cost of homes and automobiles continues to increase, pushing Americans to take on more debt. As a result, the average dollar value of auto loans has increased by 36% in the last year. This inflation-driven price increase is hitting lower-income households the hardest. Meanwhile, a recent study by Credit Summit found significant variations in personal debt between individuals based on age, education level, and family size.
It causes financial problems
Credit card debt is a major financial problem for many Americans. The average household owes $5,315 on their credit cards, and the U.S. consumer debt total is $14.9 trillion. It is essential to get out of credit card debt as quickly as possible, and there are several methods available to do so. Some of these methods include debt consolidation and debt settlement. However, each state has its own specific problems with credit card debt, which are affected by unemployment rates, home values, and the cost of attending college.
Families with high credit card debt are much more likely to fall behind on their bills. In 2004, 9.9 percent of these families were at least 60 days delinquent on at least one bill. This difference is larger than ever. And it has widened since 1989. The average household credit card debt causes financial problems for households in low and moderate-income families.