The Average Credit Card Debt in America

Credit cards have long been used by many people to assist them in covering their financial needs. Used correctly and responsibly, these products can offer a whole lot of advantages, such as flexibility in payments, contactless transactions, and efficient account management. 

Such a solution is also essential in building your credit score and getting other financial assistance products. Plus, many of these cards offer perks and rewards, depending on the issuing company and the type of card you choose.

However, mishandling your credit card can result in debt. In the United States, this debt has reached thousands of dollars on average. If you want to know more about credit card debt in America, keep reading.

The Average Credit Card Debt in America

Credit Card Debt in the United States

Experian’s 2019 Consumer Credit Review revealed that the average credit card debt in the United States is $6,194. This is a 3% increase from 2018 figures, which is $6,040. Alaska is the state that has a higher average of $8,026, while the lowest is Iowa at $4,774.

Around 67% of Americans have credit cards, and from this group, 75% of them have one or more cards that carry an average balance of more than $6,200. 

A report by the Federal Reserve Bank of New York shows that the overall credit card debt in the United States is $930 billion in the final quarter of 2019. This number is higher than the previous record-holder, which is $870 billion during the 2008 financial crisis

The $930 billion figure is also a $46 billion increase from the 3rd quarter and a $57 billion increase in the same period in 2018.

The Average FICO Score

The average FICO Score in the country also slightly went up from 701 to 703. This is also a 14-point increase compared to 2010 figures. 

Around 59% of Americans have a FICO Score of more than 700, which is a hallmark of good credit. According to the research, consumers who have credit cards have an average FICO score of 727. 

Why Is Debt High, and How Will it Affect Consumers?

According to a report by CNBC, people with higher income can be affected worse by credit card debt compared to those with lower income. Those with an income of $100,000 and above are more likely to have a credit card balance compared to those will a lower earning.

It is also important to note that there is an increase in the estimated annual household income which jumped from $77,762 in 2018 to $79,834 in 2019. 

Industry analyst Ted Rossman explained that this could be a phenomenon called “lifestyle creep”. This is when people with higher income tend to feel that they can pay their credit card balances, so they tend to use their cards more.

However, it is also important to note that household income may have grown over the past decade, along with economic growth since 2008. Despite this, the cost of living continues to increase over the same period. 

Americans Must Use Credit Cards

The Average Credit Card Debt in America

In order to survive with their paycheck, which falls short compared to their cost of living, Americans use a credit card. Interest rates are also not going down significantly, which contributes to balances. 

The situation is aggravated by the pandemic, which continues to persist. With high card debts, Americans will struggle to pay their balances over a longer period.

The Bottom Line

Credit cards can offer great help when it comes to making an ends meet. However, with an expensive cost of living, many people may have no choice but to use cards in order to compensate for the gap in income and cost of living.