Credit Cards - How Much Do We Really Owe?

by : Sally

Credit card debt seems to be growing and people are getting more and more concerned. Americans are once again polarized. Some like David Ramsey encourage consumers to shred all credit card applications and buy only things they can pay for in cash. Some say that a mature person can use loans and credit cards for his or her benefit.
Of course, there are some things most people need but can not buy with cash - cars and houses. Student loans are also looked upon as a necessity. That is why credit cards are mostly under attack.
It is a widely known fact that an average American carries about $8,000 in credit card debt. However, this number is often misinterpreted. It actually shows how much an average American household that has a credit card owes to the card-issuing financial institution. Moreover, this number is greatly influenced by credit card users with enormous credit card debts thus making the average number so shocking. According to the recent Federal Reserve report, if you add together the number of households that do not use credit cards or own nothing on them you will see that more than half Americans have no credit card debt.
The median credit card debt for those that do carry a balance is a little bit less than $2,000. Almost half of them owe less than $1,000. This figure seems to be far less alarming. Especially if you take into account the fact that the situation with paying off credit card balances is slightly but constantly improving.
The data provided by the Federal Reserve System does not differ much from the one disclosed by another acclaimed credit resource - Fair Isaac. Only a little bit over 50% of Americans with credit history owe more than $1,000 on their credit cards. More than 50% credit card owners use less than 30% of their credit line. That means that Americans are not as irresponsible when it comes to money as they are portrayed.
So does this mean that the problem of credit card debt does not exist? It surely does. Although most consumers try to avoid high balances on their plastic but there is still a significant part that is balancing on the razor's edge. One third of those who have more than $10, 000 in credit card debt have a household income of less then $50,000. The number of bankruptcies is still extremely high with about 1.5 million personal filings a year.
Another problem is unfavorable policies credit card companies use to make more money especially on those clients that fail to pay off their full balances on time. Definitely, the government needs to step in and force the banks to make credit card terms and conditions less confusing for average consumers.
But the biggest issue is financial literacy. People need to be more educated about credit and its costs. Americans need to learn to compare credit card offers before mailing another credit card application and calculate the amount of money they will need to pay back.
The situation with credit card debt is not as terrible as it is usually described by the media but there are still many problems to be solved.