Average Credit Cardholder Debt Unfortunately, many Americans do not follow this good financial rule of thumb. Experian reported that 75% of credit cardholders carry a balance on their accounts. As a result, the average amount of credit card debt consumers owed in 2020 was $5,315.
The average credit card debt of U.S. families is $6,270, according to the most recent data from the Federal Reserve's Survey of Consumer Finances. This information comes from data collected through 2019, representing the most reliable measure of credit card indebtedness in the U.S.
For most Americans, it would take over a year to pay down their credit card debt. In the South, it would take even longer. The typical American household needs about 13 months to pay down the average debt of $8,195, according to a recent analysis by CreditCards.com.
A $500 debt may not seem like much when compared to the average mortgage or student loan debt, but it can be just as burdensome, especially if that $500 has a high interest rate and could bloom to $1,000 or more if left unattended.
The bottom line: Credit card debt is bad debt because of its high interest rates and low minimum payments, and the fact that it isn't used to buy appreciating assets. Use your credit cards for the rewards and other benefits, but pay the balance in full each month.
It's not at all uncommon for households to be swimming in more that twice as much credit card debt. But just because a $15,000 balance isn't rare doesn't mean it's a good thing. Credit card debt is seriously expensive. Most credit cards charge between 15% and 29% interest, so paying down that debt should be a priority.
How to Legally Stop Paying Credit Cards
A minimum payment of 3% a month on $15,000 worth of debt means 227 months (almost 19 years) of payments, starting at $450 a month. By the time you've paid off the $15,000, you'll also have paid almost as much in interest ($12,978 if you're paying the average interest rate of 14.96%) as you did in principal.
Here are four ways to wipe out $5,000 of credit card debt — and stay out of debt going forward.
As of November 2020, consumer debt is at $14.2 trillion, with Americans carrying an average personal debt of $92,727. The overall debt figure includes credit card balances, student loans, mortgages and more.
I Have Too Much Credit Card Debt — What Should I Do?
But ideally you should never spend more than 10% of your take-home pay towards credit card debt. So, for example, if you take home $2,500 a month, you should never pay more than $250 a month towards your credit card bills.
Most lenders say a DTI of 36% is acceptable, but they want to loan you money so they're willing to cut some slack. Many financial advisors say a DTI higher than 35% means you are carrying too much debt. Others stretch the boundaries to the 36%-49% mark.
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