Household debt in the United States continues to grow, with the Federal Reserve reporting an annual rate of increase of 5.2% in April 2019. With debt on the rise — especially credit card debt — understanding the situation might be helpful, especially if you’re feeling overwhelmed by debt.
Here are some quick facts about average credit card debt in America:
- Average number of credit cards per person: 3.1
- Average credit card debt per person: $6,354
- Number of consumers who have at least one credit card: 169 million
- Average percentage of household debt made up of credit card debt: 6%
- Average interest rate on credit cards: 15.09% APR
- Generation with the highest average credit card balance: Gen X ($7,750)
What percentage of Americans have credit card debt?
According to a study by the Pew Charitable Trusts, only 46% of Americans earn more than they spend each month. Those who aren’t earning more than they spend are likely going into debt to make up the difference — including using credit cards to pay their bills.
Indeed, about 44.4% of credit card accounts are what the American Bankers Association calls “revolvers.” That means nearly half of those using credit cards carry a balance from month to month. Only about 30.4% of credit card accounts are “transactors” who pay off their balances.
In April of 2019, the Federal Reserve reports that there was more than $1 trillion in revolving credit. This is an increase from the $888 billion dollars in revolving accounts in 2014. Even though credit card balances declined by $22 billion in the first quarter of 2019, the Federal Reserve notes that this is a seasonal situation and overall debt continues to rise.
The fact that credit card debt remains at a record high might be an indication of some degree of optimism about the economy. Consumers might believe they can pay their bills.
However, when you consider the Pew numbers and the fact that less than half of Americans live within their means, it could also be a sign of financial struggle. Data from the Federal Reserve Bank of St. Louis indicates that credit card delinquencies are on the rise, which could indicate that consumers are having trouble making ends meet.
The following graph shows the increase in credit card debt over time:
As you can see, Americans’ credit card debt level is above where it was prior to the Great Recession.
The impact of interest on our credit card debt
The average interest rate on credit cards in April 2019 was 15.09% APR. However, on accounts where interest was actually assessed (for those who don’t pay off their balance each month), the average rate at the end of Q1 of 2019 was 16.91% APR.
At first glance, that might not seem significant. But when you consider that there’s $1.1 trillion in outstanding credit card debt, it results in Americans collectively paying about $186 billion in interest. And that’s if you just figure the interest simply, without taking into account daily compounding and fluctuations in balances. That’s a pretty good chunk of change.
On a more personal level, if you have that $6,354 average in credit card debt and just figure a simple 16.91% APR without considering daily compounding and whether you pay down your debt, you might pay as much as $1,074 in interest over the course of the year.
Over time, credit card interest rates fluctuate, but they seem to be rising higher. Credit card interest rates are determined, in part, by Federal rates — and the Fed rate has been ticking higher. At least in the near term, you can expect to see increases in credit card rates, making your purchases more expensive if you carry a balance.
The following graph shows the trend in average interest rate paid on accounts that are assessed interest:
As you can see, there was a relatively big jump between 2017 and 2018 and a decent jump from 2018 to 2019. At least for the near future, credit card debt is likely to cost more.
The relationship between income level and our amount of credit card debt
The higher the household income, the higher the amount of household debt. The more we make, the more we’re able to borrow. However, it’s important to note that there’s a difference in the percentage of household debt this translates to.
If someone making $20,000 a year has $3,000 in credit card debt, that accounts for 15% of their income. On the other hand, if someone has $5,800 in debt but makes $70,000 a year, that adds up to only 8.2% of their income. Even though the amount of debt is bigger for someone in a higher-income bracket, that amount is more manageable for them than it would be for someone in a lower-income bracket.
|Income Bracket||Average Credit Card Debt|
|$24,999 or less||$3,000|
|$25,000 to $44,999||$3,900|
|$45,000 to $69,999||$4,900|
|$70,000 to $114,999||$5,800|
|$115,000 to 159,999||$8,300|
|$160,000 or more||$11,200|
How each generation is handling credit card debt
When considering the average credit card debt in America, Gen X has the highest average, closely followed by the baby boomers.
Gen Z has the lowest amount of credit card debt on average, perhaps due to the fact that many in Gen Z are just getting started in life and with their finances. However, although Gen Z has the lowest average number of credit cards and the lowest average debt amount, it shares the highest level of credit utilization, 37%, with Gen X. This could be an indication that members of Gen Z are spending a little more than they should — and carrying the balances.
|Generation||Average Balance||Credit Utilization %||Average # of Credit Cards|
How much credit card debt does the average millennial have?
Millennials have $4,315 in credit card debt on average. This is less credit card debt than their older counterparts. However, millennials in general seem to be struggling. Part of the issue is their student loan debt levels.
Student loan debt has been on the rise in recent years, and many millennials graduated into a tough job market during the Great Recession. According to Pew, millennials have accumulated less household wealth than earlier generations had by the same age. For example, households headed by millennials had a median net worth of $12,500 in 2016. Compare that with Gen X, whose median net worth at the same age was $15,100. Boomers did even better, with a median net worth of $20,700.
Millennials graduated from college with more outstanding debt than their Gen X or boomer counterparts, putting them farther behind. Add in the poor job market and stagnating wages, and it’s a recipe for money management difficulties. As a result, the fact that millennials have somewhat limited their credit card debt and kept their debt utilization to 30% is a fairly impressive feat.
Does where you live impact how much credit card debt you have?
The average credit card debt in America provides you with a general view of how much debt the typical person has. But it can also be useful to look at how where you live might impact your debt.
If you live in an area with a high cost of living and your wages don’t quite keep up, you might turn to credit cards to make up the difference. On the other hand, if you live in an inexpensive area and you don’t have much temptation to spend, you might avoid some costs.
3 states with the highest average credit card balance
- Alaska: $8,515
- Connecticut: $7,258
- Virginia: $7,161
3 states with the lowest average credit card balance
- Iowa: $5,155
- Wisconsin: $5,363
- Mississippi: $5,421
It appears that, in general, big cities come with big debt. New York, Los Angeles, and San Francisco are among the top five cities when it comes to the average number of credit cards held per person. In Alaska, where the highest credit card debt amounts can be found, Fairbanks, Anchorage, and Juneau all have high average balances.
For the most part, states considered more rural, such as Iowa and Wisconsin, have lower credit card balances. And if you want to see the areas with the smallest debt amounts, you’d look in smaller cities like Hattiesburg, MS, and Wausau, WI.
What to do if you have credit card debt
If you have credit card debt, you’re clearly not alone. With more than $1 trillion in outstanding balances and the average credit card debt in America standing at more than $6,000, it’s clear that thousands of other Americans are dealing with credit card debt — and it doesn’t make them bad people.
Perhaps you’re struggling with your overall debt and hoping to get out of credit card debt as soon as possible. The good news is there’s hope. Here are some actions you can take now to improve your financial situation and get rid of your credit card debt:
1. Start with your spending
Look at your financial situation to see where you can improve. Track your spending to gauge if there are monthly expenses you can cut. When you decrease your spending, you aren’t digging deeper into debt. Plus, you can use the money you save to put toward reducing your debt.
2. Look for ways to earn more money
Perhaps you already cut your spending as much as you can. If so, you might need to look for ways to increase your income. Maybe you can sell some of your unused items to help you pay down some of your debt. You could also start a side gig or part-time job until you have your credit card debt under control.
3. Consider credit card refinancing
Interest payments can reduce the effectiveness of each of your credit card payments — keeping you in debt longer. If you can use a 0% APR balance transfer to pay off your debt, more of your money will go toward reducing what you owe. You’ll save money and retire your debt faster.
You can also apply for a personal loan and refinance your credit card debt to a lower interest rate that way. While you’re still paying interest, it will be a lot less, and you’ll benefit by demolishing your debt faster.
4. Negotiate with your creditors
Another way to get some degree of credit card debt relief is to contact your creditors and ask for your options. Some creditors are willing to reduce your interest rate to make it easier for you to make your payments. If you’re experiencing hardship, some creditors are willing to create a new repayment plan for you. Do what you can to make your debt more manageable.
5. Get credit card debt help
If you don’t know where to start when tackling your credit card debt, consider getting help. Go to the National Foundation for Credit Counseling website and look for certified credit counselors in your area. They can evaluate your situation and help you come up with a debt management plan designed to get you back on the right financial track.
You’re not alone. You can move forward and build a strong financial foundation for the future. Sit down, look at your situation, and create a plan to help you tackle your debt. No matter your circumstances, it’s possible to get out of credit card debt.
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