It's not at all uncommon for households to be swimming in more that twice as much credit card debt. But just because a $15,000 balance isn't rare doesn't mean it's a good thing. Credit card debt is seriously expensive. Most credit cards charge between 15% and 29% interest, so paying down that debt should be a priority.
How much debt is a lot? The Consumer Financial Protection Bureau recommends you keep your debt-to-income ratio below 43%. Statistically speaking, people with debts exceeding 43 percent often have trouble making their monthly payments.
A minimum payment of 3% a month on $15,000 worth of debt means 227 months (almost 19 years) of payments, starting at $450 a month. By the time you've paid off the $15,000, you'll also have paid almost as much in interest ($12,978 if you're paying the average interest rate of 14.96%) as you did in principal.
How much money does the average American owe? According to a 2020 Experian study, the average American carries $92,727 in consumer debt. Consumer debt includes a variety of personal credit accounts, such as credit cards, auto loans, mortgages, personal loans, and student loans.
Generally speaking, a good debt-to-income ratio is anything less than or equal to 36%. Meanwhile, any ratio above 43% is considered too high.
Likewise, millennial consumers (ages 25 to 40) have an average of $27,251 in non-mortgage debt, presumably across credit cards, auto loans, personal loans and student loans.
Kevin O'Leary, an investor on “Shark Tank” and personal finance author, said in 2018 that the ideal age to be debt-free is 45. It's at this age, said O'Leary, that you enter the last half of your career and should therefore ramp up your retirement savings in order to ensure a comfortable life in your elderly years.
And yet, over half of Americans surveyed (53%) say that debt reduction is a top priority—while nearly a quarter (23%) say they have no debt. And that percentage may rise.
25—34 year olds = $78,396
Credit cards often have high interest rates that can cause debt to snowball. Younger millennials carry an average debt of $78,396, primarily due to credit card balances, according to Experian.
On average, Americans carry $6,194 in credit card debt, according to the 2019 Experian Consumer Credit Review. And Alaskans have the highest credit card balance, on average $8,026.
Anything over 30% credit utilization is considered high and will hurt your credit score — and that goes for your debt per card as well as your total debt overall. Lower credit utilization is more favorable.
“Good” debt is defined as money owed for things that can help build wealth or increase income over time, such as student loans, mortgages or a business loan. “Bad” debt refers to things like credit cards or other consumer debt that do little to improve your financial outcome. These are oversimplifications.
The simplest way to make this calculation is to divide $10,000 by 12. This would mean you need to pay $833 per month to have contributed your goal amount to your debt pay-off plan. This number, though, doesn't factor in the interest on your debt.
Is being debt-free the new rich? Yes, as long as you have money and assets, in addition to no debts. Living loan-free is a fantastic way to stay financially secure, and it is possible for anyone. While there are a couple of downsides to being debt-free, they are minimal.
INCREASED SECURITY. When you have no debt, your credit score and other indicators of financial health, such as debt-to-income ratio (DTI), tend to be very good. This can lead to a higher credit score and be useful in other ways.
Being debt-free is a financial milestone we often hear about people striving for. Without debt, you can focus on building more savings, investing those extra funds and just simply having more peace of mind about your finances.
It can be difficult to get out of debt quickly. The average person should be debt free by the age of 58, unless you choose to extend your payments. Otherwise, you could potentially be making payments for another two decades before you become debt free.
The average American has $90,460 in debt, according to a 2021 CNBC report. That included all types of consumer debt products, from credit cards to personal loans, mortgages and student debt. The average amount of debt by generation in 2020: Gen Z (ages 18 to 23): $16,043.
Former Société Générale rogue trader Jérôme Kerviel owes the bank $6.3 billion.
However, far from debt being out of the ordinary, it may be a normal part of everyday life. In fact, studies suggest it's actually normal to owe large amounts of debt.
In August 2021, about 64 million people with a credit record (about 28 percent of Americans) had debt in collections on their credit report, down from 68 million in 2019.