With little available credit, they no longer are useful for emergencies or other unexpected expenses, the high balances can damage your credit scores, and the debt can become unmanageable when high-interest rates make it difficult to pay down the balances.
But the truth is that the most common causes of credit card debt are situations that someone didn't invite and couldn't avoid. Major life events like divorce, layoffs and medical challenges are all leading causes of debt problems for many consumers in the U.S.
Consequences of Credit Card Debt
Since it's revolving debt, your minimum payments likely will rise with the increase in your balance. The more you charge, the harder credit cards become to manage. Lower credit scores: Credit utilization is a crucial factor in calculating your credit score.
Ted Rossman, a senior analyst at Bankrate, said we're approaching a record-high amount of credit card debt nationwide. “It's because of inflation. People are spending more. But higher interest rates is going to add insult to injury,” he said.
Main source of debt among consumers in the U.S. 2017-2021
In 2021, 24 percent of U.S. consumers said that their main source of debt was their home mortgage, followed by credit card debt. The share of consumers with no debt increased six percent between 2020 and 2021.
If you have credit card debt, you're not alone. On average, Americans carry $6,194 in credit card debt, according to the 2019 Experian Consumer Credit Review.
You could end up with a debt collection lawsuit and a judgment if you don't pay your credit card bill over time.
If that number comes out to 36% or higher, lenders consider that a high risk debt load, according to Bankrate. If it's between 15% and 35%, you should still consider ways to reduce it. When debt is interfering with achieving your financial goals, it's too much.
If your total balance is more than 30% of the total credit limit, you may be in too much debt. Some experts consider it best to keep credit utilization between 1% and 10%, while anything between 11% and 30% is typically considered good.
1. Lack of understanding. Many consumers lack even a basic understanding of personal finance. This includes why debt is (mostly) bad, how to budget, and how to prepare for their long-term future.
Credit Card Debt Trends
In Q4 2021, the average credit cardholder in the U.S. had $5,934 in credit card debt in Q4 2021 — about 0.6% less than Q4 2020's $5,968 average. During this same period, Americans opened 26 million more credit card accounts.
The average debt for individual consumers dropped from $6,194 in 2019 to $5,315 in 2020. In fact, the average balance declined in every state.
Debt stress syndrome is the name that doctors have given to a condition where concerns over debt lead to mental, emotional and even physical health problems.
Debt can lead to anxiety and depression, which can increase headaches, affect sleeping patterns and impact a person's ability to focus. This type of physical stress on the body can result in more frequent colds and infections and affect a person's ability to go to work which further enhances financial struggles.
Fortunately, your home is safe from any creditors who do not have a mortgage or lien on it. Credit card companies and other unsecured loan holders can't come and simply take your property or home after missing a few payments. A creditor will first start making collection attempts by mail, phone calls or other methods.
Failure to pay credit card debt is not a crime in the United States. The US have debunked debt imprisonment in the 1950's which decriminalized the act.
Credit card companies sue for non-payment in about 15% of collection cases. Usually debt holders only have to worry about lawsuits if their accounts become 180-days past due and charge off, or default.
Borrowers get into trouble when they acquire new debt on the now-paid-off credit cards — often marketed as affordable due to low minimum payments — and again, the cycle perpetuates. One way to avoid a debt trap is by building your savings.
Average American Credit Card Debt in 2022: $5,221. Many or all of the products here are from our partners that pay us a commission.
Key credit card debt statistics
Here's a look at a few of the most recent key credit debt statistics, according to Experian: Average credit card balance: $5,221.
Highlights: Credit scores are three-digit numbers that show an important piece of your financial history. Credit scores help lenders decide whether to grant you credit. The average credit score in the United States is 698, based on VantageScore® data from February 2021.
A good annual income for a credit card is more than $39,000 per annum for a single individual or $63,000 per year for a household. Anything lower than that is below the median yearly earnings for Americans.