How Much Is The Average Credit Card Debt Per Household?

Average Credit Card Debt Per Household

How many times have you withdrawn a wad of cash only to see it disappear a few days later with little idea where it all went? By putting as much expenditure on my credit cards as possible I get a handy dandy pie chart and expense line breakdown at the end of every month to see where my money is going. Furthermore, I get all those juicy rewards points that really begin to rack up over time.

The average household owes $15,191 based on data from the Federal Reserve and Nerd Wallet, a credit card lead generator. They also throw out a $7,191 number for average credit card debt for “non-indebted households.” According to the Experian Intelliview tool, the average credit card balance per consumer was $3,779 in 1Q2013. However, consumers with low credit scores – like a “D” in the VantageScore range – had average credit card debt of $5,965. Finally, according to the average credit card debt per U.S. adult, excluding zero-balance cards and store cards is $4,878. The average debt per credit card that usually carries a balance is $8,220. And the average debt per credit card that doesn’t usually carry a balance is $1,037 (must equal spend).

It’s hard to figure out what’s the right number because they seem way too high and all over the place given the median household income is around $51,000. One way to finding a better average credit card debt and spend number is to simply get more datapoints with a short four question survey below.

The impact on the amount of average revolving credit card debt per household is largely determined by income. You might have an astounding $15,000 in revolving credit card debt, but if you are making $1 million a year, who cares? The more pertinent measure is average revolving monthly credit card debt to average monthly gross income.

What’s confusing is that it’s unclear whether people who pay off their credit card bills every month are also included in the average credit card debt per household. After all, when I charge something on my card, I have interest free debt for 28-31 days, depending on the month, until I pay the bill off in full. The solution is to simply calculate the average credit card spend a month to the average monthly gross income, and calculate the average revolving credit card debt a month to the average monthly gross income to get a more thorough picture.

What’s The Most Amount Of Travel Miles And Credit Card Rewards Points You’ve Accumulated A Year?

Beautiful Santorini, GreeceWhen I was a young buck, I used to travel like a maniac for work. I was based in Manhattan and had to cover clients in Florida, Bahamas, Iowa, Texas, Colorado, and California. Then there were the necessary quarterly or semi-annual pilgrimages to Hong Kong to kiss the ring. When you’ve got a corporate card with unlimited credit, you feel a little better about taking red-eyes to your 8am meetings. But after a while, the novelty wears off and all you want to do is take the Chairman’s Flight (fly in the middle of the work day).

Travel miles and credit card rewards points was my combination of choice because not only would I gain more points flying more miles, I would then gain rewards points for every dollar I spent on the ticket, hotels, food, and entertainment. For example, I’d earn 16,100 points for flying to Hong Kong from New York City roundtrip + 5,000 points for the cost of the business class ticket + 2,500 points for seven nights in a hotel + 1,000 points for food + 500 points for entertainment. The total rewards points accumulated would therefore equal ~25,000 for a one week business trip to Asia.

I used to have a Delta Skymiles credit card, an American Airlines credit card, and an AMEX corporate card as part of my arsenal of spending tools. After racking up 130,000 travel miles one year and accumulating roughly 180,000 credit card rewards points, I realized that having three travel credit cards was inefficient so I consolidated to just two. (See: What Is The Ideal Number Of Credit Cards One Should Have?)

I was so proud of my 130,000 travel miles that I actually included that stat in a line item on my resume in my 20s. I know, a rookie move. In retrospect, I don’t know how impressive the stat was since I’ve heard of people travel 300,000 – 500,000 miles a year, which I find absolutely amazing. But those folks were either executives who constantly flew first or business class internationally, or worked in the airlines industry.

Use A Credit Card To Protect You From Everything Bad

Bad boy, credit card fraudI don’t understand people who don’t use credit cards. Not only do you get an interest free loan for 30 days, you also get rewards points. Perhaps even more importantly, you get fraud and conflict protection.

In “When Saving Money Is No Longer Worth Your Time But You Do It Anyway,” I called up my credit card company to dispute my $35 Walgreen charge out of principle because I felt the pharmacist had misled me. Instead of the credit card company filing a dispute, they simply credited me back $35 dollars, no questions asked.

Getting double travel rewards points with the Barclaycard Arrival World MasterCard is great, but what I really like about the card is travel insurance. Barclaycard offers $200,000 in automatic travel accident insurance, reimbursement for expenses if your bag is lost or delayed, trip cancellation coverage, and $0 fraud liability. When I’m on vacation or traveling for business, the last thing I want is to stress about is crap that’s outside of my control.

Instead of me spending hours disputing charges or recuperating losses, I’ll just call the credit card company to dispute and recuperate for me. The older and wealthier you get, the less you want to sweat the small stuff. 

Credit Card Approval Standards On The Rise: Excellent Credit Scores Still Get Denied

Deny ButtonOne reader with a 805 credit score e-mailed me saying he recently got denied for the Barclaycard Arrival World MasterCard. As part of the FICO Open Score Access initiative, he got his credit score in the mail plus the nice rejection letter. The reason for the rejection was a high debt-to-income ratio.

The credit score is supposed to encapsulate everything from outstanding debt, number of credit lines open, and debt to income levels, yet here he is being denied a credit card with just a $3,000 monthly credit limit to start! If someone with a credit score that’s in the top 10% can’t get a credit card, what hope is there for the other 90%? Let’s find out more about his story.

The reader used to make about $200,000 a year for the past three years, but is currently unemployed and earns $40,000 a year from his various passive income streams + his $1,800 a month unemployment checks. He’s only got two other credit cards and always pays them off in full. The problem with his financial profile is that he has a $800,000 mortgage on a $40,000 income. With the industry standard of a mortgage amount no more than 5X your annual income at existing rates, it’s easy to see why a 20X ratio would cause concern.

But here’s the kicker. The reader also has $500,000 in cash, CDs, and liquid after-tax stock investments! Surely if you were the credit card company you’d be OK with approving a potential lifelong client even if he does have a high debt-to-income ratio of 20:1. What’s missing here is the calculation of debt-to-total-assets

An Easier Way To Get A Price Match Guarantee On Purchases

New 50" LED SmartTV

New 50″ LED TV with old CRT TV In Reflection

It occurred to me that getting a guaranteed price match might be easier than the five steps I outlined in my holiday shopping strategy guide post. I ended up going to Best Buy three times to deploy my savings strategy on the electronics I bought for my parents.

Trip One: Bought a 50″ LED SmartTV for $799, a soundbar for $249, and a Chromebook for $199 pre-tax on a Tuesday before Thanksgiving. Best Buy return policy is 15 days, so I was all set to try and take advantage of the price match during the Black Friday weekend sales.

Trip Two: Went back on Thanksgiving Thursday at 11:50pm after a poker game to get a 32″ LED TV and blu-ray player on sale for my mother and also see if I could get a price match for the 50″ LED SmartTV which is now on further sale for $599. They said, “no” which I had anticipated since Best Buy’s policy is to not price match on Black Friday, but unclear on the entire weekend sale. I was not deterred because they often say yes later on because I can simply return the product and argue for the cheaper price within the return policy. Besides, I had more stuff to buy this trip.

Trip Three: I was going to go back on the Monday after the Black Friday to try again on the 50″ TV and also price match anything I find on sale from Cyber Monday. But as luck would have it, I played golf on Sunday afternoon after Black Friday just a couple miles away from Best Buy so I did a drive by on the way home. Best Buy thankfully agreed to credit me $209 after tax for the 50″ LED SmartTV and I also returned the blu-ray player because it couldn’t connect to the internet. I also returned the chocolate HDMI cable for $38 and got a generic one for $9.95 because I’m connecting the blu-ray to a 32″ TV with no add-on sound system. Paying up for a fancier HDMI cable would therefore be a waste.

Despite making one extra trip than anticipated, I’m happy to have gotten the best deals possible for products I needed to buy for my parents anyway. Thankfully Best Buy was relatively quiet all three times I went. It was about time my parents upgraded their old notebook and 25+ year old CRT TVs. The biggest pain was actually trying to carrying those beasts out to the garage!