Average Credit Card Debt - The Truth Exposed!

Almost every one accumulates some level of credit card debt at some point or other.  Wouldn’t it be nice to know how you compare to the average credit card debt level in America?  I mean, it’s probably useful to know if your own level of debt is reasonable compared to others – or completely out-of-whack.

Well, the good news is that many organizations do keep track of average credit card debt levels.  Unfortunately, the bad news is that most organizations have widely varying numbers.  For example, the Federal Reserve’s Survey of Consumer Finances suggests that most households that carry debt carry balances of less than $2,000.  On the other hand, organizations like CardWeb.com suggest that Americans carry an average credit card debt load of over $9,000!

Why the Differences?

These differences in the calculations usually stem from one of several factors, including:

• Different assumptions about what constitutes “debt”:  Sites like cardweb.com develop their averages by dividing the total amount of credit card balances across the country by their assumption of the amount of households with at least one credit card.  This assumes that everyone with any kind of balance “carries” that balance over time instead of paying it off monthly, and does not take in to account the many credit card users who actually pay off their cards every month.
• Different calculations of what kind of debt to include:  Some calculations of average credit card debt look at all debt, including bank cards, store cards, gas cards and the like.  Others include just bank cards, such as those issued by Visa and Mastercard.
• Different understandings of the number of households that have credit cards (and how many they have):  Estimates of the number of households that have credit cards vary widely.  In addition, it can be difficult to get a handle on how many credit cards are held by each individual household.  This makes it difficult to get an accurate assessment of the average credit card debt per family.

Do Averages Really Matter?

In addition to being inaccurate, the problem with averages is that they don’t tell the whole story.  As MSN Money suggests:

If you know anything about statistics, however, you know that averages don’t really tell the tale . . . a relatively small population with huge credit card balances can skew the average to make it look like the typical American is carrying a much bigger debt load than he or she actually is.  (From http://moneycentral.msn.com/content/Banking/creditcardsmarts/P74808.asp)

In fact, over 50% of Americans carry no credit card debt at all.  Most of the responsibility for the high average credit card debt levels is concentrated within a small percentage of the population.

If Averages Don’t Matter, What Does?

Regardless of the truth behind the average credit card debt numbers, anyone with credit cards needs to understand how their own level of debt impacts their lifestyle.  If the total amount of average credit card debt you carry on an ongoing basis is more than 25% of your income, it may be that you are living a bit beyond your means. 

In fact, many Americans seek a completely “debt free” lifestyle.  They do not hold mortgages, car loans or any credit card debt. While this may seem like an extreme approach, these individuals generally have tremendous success saving their hard earned dollars for emergency and retirement.