Figuring out the various statistics, and especially when one fact seems to contradict another, can be frustrating.
Understanding these numbers, however, is important if we’re ever to fully grasp not only the importance of credit, but the power each of us have anytime we say those two familiar words, “Charge it!” Once the facts begin to emerge and those numbers seem to make better sense, the picture can be a bit disconcerting. Take a look at these statistics and see where you and your spending habits fit in.
Nothing but the Facts
In 2010, the US Census Bureau revealed Americans hold sightly more than $866 billion in credit card debt. That’s a lot of money – until you see what the trends suggest and what the Census Bureau predicts for 2011:
$1.177 trillion. That’s right – trillion.
To put this into a better context, consider the total of the national debt. Remember, this is the government debt that includes money owed to other countries as a result of borrowing. That grand total is right at $14 trillion.
That’s a lot of credit card debt and certainly when you put it in perspective with the national debt.
Then and Now
The US Census Bureau also reports each American card holder had an average balance of $5,100 in 2010. That number is expected to increase to more than $6,500 in 2011. Of course, this is also indicative of interest charges, too. This is one reason why a healthy and responsible approach to our credit card debt is crucial.
The fact that our debt is on the increase suggests more of us will be relying on credit access rather than our bank balances. Couple this with the news over the past several days of rising oil prices, there’s a good chance many of us will be financing the gas we put in our cars – which is never a good idea, of course, but for some, it may be a necessary evil in the coming days.
While some of us pay our credit card balances in full each month, there are many, approximately 33%, in fact, who carry a total balance of $10,000 or more. This can be spread across several cards (or not), but interest on $10,000 is a lot whether it’s on one credit card or five credit cards.
Charging it Off
Another sobering fact is the dollar amount that was charged off by the collective credit card industry the last six months of 2010. It too is yet another overwhelming figure: $21,827,510,500. That’s more than $21 billion! That equates to just under 11% of total credit card debt – and it was an increase from the first six months of the year.
Wondering which states are better when it comes to managing credit card debt? Maybe you’re wondering if your state is one that’s ranked high when it comes to high balances? The highest state average credit card debt, again, courtesy of the Census Bureau’s latest statistics is Alaska. Tennessee comes in second and Nevada ranks third. The states with the lowest state average credit card debt is Iowa, followed by North Dakota and South Dakota is third (though only slightly lower than North Dakota).
Finally, in 1990, the average household credit card debt was right at $3,000. In 2007 (about the time the recession was beginning to take hold), that total was $9,840 per household. The sudden drop between 2007 and 2010 was due to the number of bankruptcies that eliminated credit card debt for many Americans.
All of these numbers allow for a bit of reality. Managing credit card debt should be everyone’s priority. There’s no better time than the present to educate yourself, especially if you’ve had credit problems in the past. The last thing you want to do as a consumer is begin a vicious cycle of taking one step forward and two steps back.
It’s similar to throwing new paint on a peeling house: it’s going to look great for awhile, but sooner or later, that old paint is bound to chip through. Make a plan, consult a financial planner if necessary and then follow through. It’s the sure way to ensure a healthy financial future.