3 Shocking Facts About Credit Card Debt in America

1. Americans owe $1 Trillion in Total Credit Card Debt

According to the U.S Federal Reserve, total credit card debt in America surpassed $1 trillion in 2017. This is the highest level of credit card debt since the financial crisis. I’m of two minds on this stat.

If I’m wearing my economist hat, this might actually be good for short-term economic growth. As I’ve written in the past, consumption is the major driving force of GDP in developed countries. So higher credit card debt means Americans are consuming and buying big-ticket items like cars. This helps companies expand to meet increased demand leading to increased investment and employment.

If I’m wearing my personal finance hat, this is a very worrying statistic. This means that people are not living frugally. They are spending outside of their means, buying things they probably don’t need. Throwing that $7 fancy coffee on the credit card every morning might feel satisfying in the moment, but it’s jeopardizing many peoples financial future.

2. Americans Paid $104 Billion in Credit Card Interest Last Year

According to Forbes, American consumers paid over $104 billion in credit card interest and fees in the past 12 months. Credit card interest payments have increased by 11% compared to the year before and 35% over the past 5 years. With the Federal Reserve expected to continue to raise interest rates over the next few years, it is expected that the amount of credit card interest paid annually will continue to increase rapidly.

Whether I am thinking like an economist or personal finance writer, $104 billion in annual credit card interest is a very bad thing.

If I’m wearing my economist hat, this may reduce consumption moving forward, which could mean a slowdown in economic growth. Every dollar the average consumer spends serving credit card debt is a dollar they are not spending on consumption of goods and services that provide economic value. If Americans are going to be spending more and more on credit card fees, overall consumption in the economy might decline.

If I’m wearing my personal finance hat, this is downright scary. High-interest credit card debt is like an anchor on your financial life, it completely weighs you down. High levels of credit card debt can be extremely stressful and put your family in a precarious situation. If you are spending $350 a month just to make your minimum credit card debt, you may not pay that debt off for years or even decades. Not to mention what would happen if you lost your job or took a pay cut.

3. The Average American Owes $6,375 in Credit Card Debt

That is up 3% from the year before according to CNBC. On the bright side, even though overall credit card debt and interest rates have been increasing over the past few years, Americans have done a better job managing that debt. In 2018 the average FICO score reached 695. That is a fairly high average as FICO scores range from 300–850. This tells us that Americans have done a better job making their payments on time. A sign that credit card debt has not (yet) been too difficult for the average American to handle.

For an Extended Discussion on Debt Repayment Strategies Checkout this Video

This article is for informational purposes only, it should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions.