This is part one in a two part series about credit card debt and where we actually stand as a nation when you consider the pure numbers. You have probably heard figures like "The average American carries more than $8,000 in credit card debt on average." But what does this figure mean, exactly? This is a figure that is frequently cited by journalists, politicians and pundits in attempt to warn us of the impending economic collapse. These individuals are going to argue that we have to stop spending like drunken sailors because we are already struggling under a massive debt burden that will only get worse. In other words, the economic recovery is certainly doomed!
The real surprise when it comes to this statistic is not how widely known it is, but rather the fact that it paints a picture that is not exactly accurate. In reality, most Americans do not owe anything to credit card companies, and most households that due have a credit card balance tend to owe less than $2,000. Only around 1 in every 20 American households actually owes $8,000 or more in credit card debt, so this picture is only ringing true for 1 in every 20 Americans. Is that really accurate?
Averages do not tell the right story, because the $8,000 average figure comes from places like Card Web where credit card trends are tracked, but they are not paying attention to the fact that the average debt per American Household was $8,940 in 2002, and no new figures have been released on the site since that point. So no, most American households are not holding $8,000 or more in debt - The figures are misleading simply because there is not enough new data to support better, more accurate numbers.
Yes, by the measures that Card Web is taking, the average debt in households with at least a single credit card is certainly growing, but this average statistic simply is not telling the true tale. The truth is, we are actually a lot more frugal than we used to be. There are Americans out there with enormous credit card debt racked up, and they may be messing up the average for the rest of us, but most Americans are handling their money.
Consider this:
* 23.8 percent of all American households do not even have a credit card.
* 31.2 percent of households surveyed by the Federal Reserve paid their most recent credit card bills off completely, in full.
* Together, households owing nothing on credit cards already equal 55 percent of the total with these two figures alone, according to the Fed.
Paying off balances became more common over the last few years, with 55.3% of consumers reporting stating that they regularly paid their balances off in full.
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Originally posted 2009-02-09 05:03:59. Republished by Blog Post Promoter
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Also, there are those of us who otherwise pay our credit card debt in full each month but play the 0% balance transfer game when offers arrive. (That is, borrow several thousand at 0%, earn interest on it during the 0% promotional period, then pay it off in full without having paid a dime in interest.) I recently had over $30k in 0% debt that was paid in full without paying any interest, but I probably would have been counted as a household in debt under such studies.
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