The Average American Family's Credit Card Debt

Credit card debt is something that most Americans live with. Although, the amount of credit card debt individuals live with is not quite as frightening as the media and even politicians would have us believe. The majority of Americans believe that most everyone is living with up to $10000 of credit card debt at any one time, and while some people do have a debt load this large, that is not the case for most people. The average credit card debt is in fact significantly lower and much more manageable according to a 2001 study.

The Federal Reserve's Study on consumer finances in 2001 revealed that the majority of Americans do have credit card debt, but less than $2000 per household. Also, the study revealed that many Americans do not owe a penny to credit card companies because they don't have a credit card, don't use it, or pay it off in full each month. This picture of America's credit card debt is much better than the one society has been painted in the past.

The newest Federal Reserve Study for 2004, which will be available later in 2006, may have different results, but it is unlikely. It is true that Americans have credit card debt, but it appears the credit card debt is considerably lower and much more manageable than ever imagined.

One problem that might be at fault for the misconception that all Americans are in credit card debt above their heads is that many averages are floating around out there. The average American with a credit card has $8000 of credit card debt, but that does not truly reflect the amount of credit card debt each household really has. A high debt rate of a few can really impact the average debt of everyone. The Federal Reserve found that almost 24% of Americans have no credit card, bank card, or charge card of any kind. Also, almost 30% of Americans pay their credit card bills in full each month. So that leaves more than half of Americans who don't owe credit card companies anything and another 45% that owe a variety of amounts.

Approximately 29% of households have less than $1000 of credit card debt, 21% owe more than $3000, 6% owe more than $8000, 4% owe more than $10,500, and only 1% of the population owes more than $21,400. These percentages show a much better sign of how much money Americans owe to credit card companies. More than half the country owes nothing and a good percentage of the rest only owe a small amount. However, those that do owe a lot of money to credit card companies are in big trouble.

The study found that households with more than $10000 of credit card debt had an income of approximately $50000. That is to say that it would require more than 20% of that household's income to pay off the debt in a year's time. Obviously most households can't survive on 20% less so they continue making minimum payments while interest rates drive the balance up even more.

The problem with households that have high debt rates is that they try and live beyond their means. A better approach to life is paying for what you buy in cash when you buy it. Then you almost never buy something you can't afford or become tempted by something on sale.

Credit card debt is a big deal and fortunately most Americans are relatively frugal and responsible with their credit. Others however are not and that is how a misconception of $8000 of credit card debt per household can become commonplace in society.