Credit cards can be great financial tools — they can help you pay for items, get you rewarded for your spending and even help you build credit. But if you don’t use them responsibly, you can find yourself in credit card debt.
How often does this happen? Well, it’s not easy to establish the average American credit card debt, as the information that is typically gathered is based on card balances, which is different than debt. After all, some consumers pay their balances in full each month while others make the minimum payment due on each statement. And averages are just that — averages — which means consumers who have very high balances can significantly skew the numbers.
That said, Experian, one of the three main credit bureaus, reports that the typical consumer in America has an average of 2.35 credit cards as of 2016. (Note: These are only bank credit cards and do not include retail credit cards.) And with those cards, Experian found that the average balance on bank cards in America in 2016 is $5,551. That number is up from the approximate $4,400 balance Experian reported in 2015.
How Many Americans Are In Debt?
According to a Pew Charitable Trust report from July 2015, eight out of every 10 Americans is in some form of debt. That includes debt from mortgages, car loans, unpaid credit card balances, medical bills, legal bills, student loans or a combination of these. Credit card debt accounted for 39% of that debt, making it the second most frequently held debt.
How Many Credit Cards Does the Average College Student Have?
Gone are the days of college students signing up for credit cards because of tempting freebies, thanks to the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009. Not only that, the CARD Act made it so borrowers younger than 21 were unable to sign up for a credit card without a cosigner or proof they’re able to repay what they borrow.
That said, college students still do get credit cards — and credit card debt. According to the March 2016 Sallie Mae “Majoring in Money” study, more than half of college students (56%) report having at least one credit card. And, according to the study, they’re using that card (or cards, in some cases), responsibly — 63% say they’re paying the balance in full each month, and 73% say they pay it without assistance from parents or another adult. And how much are they carrying on those cards? Turns out, almost 70% of them say they have an average monthly balance of $500 or less.
How Credit Card Debt Affects You
Credit card debt can be stressful, for sure. But that’s not the only way you’re going to feel the effect of carrying too much credit card debt. The amount of debt you carry in relation to your credit limit is called your credit utilization ratio. Credit experts recommend keeping this at 30% of your total credit limit, and ideally 10%, to have the best effect on your credit scores. You can see how your debt usage is affecting your credit by viewing two of your credit scores, updated every 14 days, on Credit.com.
Not quite there yet? You may want to consider using this credit card payoff calculator tool to help you figure out how larger payments could help you save on interest fees and get you out of debt sooner.
Additional reporting by Gerri Detweiler.