From school and vehicle loans to credit card debt, the average American owes money in one way or another.
According to data from an Experian consumer debt research, which assessed credit report information for a statistically meaningful sampling from its database, outstanding consumer debt in the United States reached $14.88 trillion in 2020.
How much credit card debt is there in America?
According to the latest data from the Federal Reserve Bank of New York issued on Feb. 11, Americans’ credit card debt reached a new high of $930 billion in the fourth quarter of 2019.
Credit card balances are up $46 billion from the previous quarter and up an alarming $57 billion from the same period last year. The Federal Reserve’s research shines light on America’s expanding debt problem and the heightened danger that younger consumers face.
What is the average credit card debt in America 2020?
Individual consumers’ average debt fell from $6,194 in 2019 to $5,315 in 2020. In fact, every state’s average balance decreased.
Following years of expansion, the coronavirus outbreak caused a decline in both outstanding credit card debt and issuer credit limits in 2020. The lowering in balances have been ascribed to lower spending during quarantine periods, as well as the opportunity to pay down balances with economic impact payments and additional jobless money.
According to CompareCards, banks reduced card limits for 34% of consumers at the outset of the crisis as a method to avoid potential losses in uncertain economic times.
Credit Card Debt
Eight out of ten persons in the United States have a credit card, and 45 percent of American families have a credit card balance (that is, they do not pay their credit cards down to zero each month, resulting in credit card debt). 6,7,8 This equates to just over 55 million debt-ridden families. 9,10 The average credit card debt per household is $14,241, with a total debt of $787 billion in the United States. 11,12,13
Credit cards have an average APR (annual percentage rate, or interest rate) of 17.13 percent.
14 That average interest is paid by the 55 million families with credit card debt.
Consider this: If you add 17.13 percent by the $787 billion in debt owed by Americans, credit card corporations will generate nearly $134.81 billion in interest alone.
Although some credit card users claim that they do not carry a balance, more than half of them do. According to the Federal Reserve, only 48% of Americans who have credit cards pay their bills in full each month. 15 The remaining 52% are in debt, adding to interest costs and the $787 billion figure.
Student Loan Debt
The total amount owed on student loans in the United States is $1.57 trillion, with each borrower owing an average of $38,792. (as of summer 2021). 16,17 Student loans are the fastest-growing debt in America (up over 157 percent since the Great Recession), accounting for 11 percent of the country’s total debt. 18 After mortgages, this is the second-largest percentage. 19
The total amount of student loan debt owed by Americans aged 18 to 29 is $333 billion. And, despite the fact that student loans account for only around 2% of debt among Americans aged 70 and up, they owe a total of $27 billion. 20,21,22 (Yes, some 70-year-olds are paying for their own or someone else’s college education.) Allow it to sink in.)
Student loans, according to young adults, prevent them from making basic financial and life decisions. For example, 40% of people put off investing in retirement and 47% put off purchasing a home. Because of their student loan burden, 21% of people put off getting married. 23
Auto Loan Debt
The total amount owed on auto loans in the United States is $1.42 trillion. 24 Thirty-seven percent of American homes (about 45.4 million) are in this situation, with an average debt of $31,142 per household. 25,26,27
So, how much do these people pay on a monthly basis? The average monthly car payment in the United States is $577 for new cars and $413 for used cars. 28
HELOC Debt
A HELOC (home equity line of credit) is a loan that allows you to borrow money against your house’s current value, utilizing the equity you’ve built up as security. In other words, you’re giving away your hard-earned equity in exchange for additional debt.
In the United States, there are approximately 4.7 million HELOCs (totaling $349 billion), with the typical American home owing $73,685.
29,30
The percentage of HELOC debt held by older Americans is the highest. HELOCs account for less than 1% of debt held by people aged 18–29 and 1% of debt owned by those aged 30–39, but this ratio jumps to 6% for those aged 70 and up. 31,32,33
Mortgage Debt
Housing is the most common monthly expense for most people. That is, rent or mortgage payments account for a higher percentage of their monthly income than any other budget item (think of categories like utilities, groceries, insurance, etc.).
The average monthly mortgage payment in the United States is $1,595.
34 Mortgage debt, which accounts for 70% of all American debt, has the highest amount of $10.44 trillion. 35 Mortgages are held by 42% of households. (There are over 51.5 million households in the United States.) In addition, the average mortgage debt in the United States is $202,454. 36,37,38
How much is China’s debt?
7.0 trillion dollars), or around 45 percent of GDP. Chinese local governments may have an additional CN 40 trillion ($5.8 trillion) in off-balance sheet debt, according to Standard & Poor’s Global Ratings. According to the International Monetary Fund, debt owed by state-owned industrial businesses accounts for another 74 percent of GDP. A additional 29 percent of GDP is owed by the three government-owned banks (China Development Bank, Agricultural Development Bank of China, and Exim Bank of China). China’s high debt level is a contemporary economic issue.
Why is America so in debt?
The total national debt due by the federal government of the United States to Treasury security holders is known as the US national debt. The national debt is the face value of all outstanding Treasury securities issued by the Treasury and other federal government agencies at any one moment. The terms “national deficit” and “national surplus” normally relate to the federal government’s annual budget balance, not the total amount of debt owed. In a deficit year, the national debt rises because the government must borrow money to cover the gap, whereas in a surplus year, the debt falls because more money is received than spent, allowing the government to reduce the debt by purchasing Treasury securities. Government debt rises as a result of government spending and falls as a result of tax or other revenue, both of which fluctuate throughout the fiscal year. The gross national debt is made up of two parts:
- “Public debt” refers to Treasury securities held by people, corporations, the Federal Reserve, and foreign, state, and local governments, as well as those held by the federal government.
- Non-marketable Treasury securities held in accounts of federal government programs, such as the Social Security Trust Fund, are referred to as “debt held by government accounts” or “intragovernmental debt.” Debt held by government accounts is the result of various government programs’ cumulative surpluses, including interest earnings, being invested in Treasury securities.
Historically, the federal government’s debt as a percentage of GDP has risen during wars and recessions, then fallen afterward. The debt-to-GDP ratio may fall as a consequence of a government surplus or as a result of GDP growth and inflation. For example, public debt as a percentage of GDP peaked just after WWII (113 percent of GDP in 1945), then declined steadily over the next 35 years. Aging demographics and rising healthcare expenditures have raised concerns about the federal government’s economic policies’ long-term viability in recent decades. The United States debt ceiling limits the total amount of money Treasury can borrow.
The public held $20.83 trillion in federal debt, while intragovernmental holdings were $5.88 trillion, for a total national debt of $26.70 trillion as of August 31, 2020. Debt held by the public was around 99.3% of GDP at the end of 2020, with foreigners owning approximately 37% of this public debt. The United States has the world’s greatest external debt, with a debt-to-GDP ratio of 43rd out of 207 countries and territories in 2017. Foreign countries held $7.04 trillion worth of US Treasury securities in June 2020, up from $6.63 trillion in June 2019. According to a 2018 assessment by the Congressional Budget Office (CBO), public debt would reach approximately 100% of GDP by 2028, possibly more if current policies are prolonged past their expiration dates.
The federal government spent trillions on virus help and economic relief during the COVID-19 pandemic. According to the CBO, the budget deficit in fiscal year 2020 will be $3.3 trillion, or 16 percent of GDP, which is more than quadruple the deficit in fiscal year 2019 and the highest as a percentage of GDP since 1945.
How much debt is normal?
Debt, on the other hand, carries some risk and can be costly. Not only do you have to pay interest and fees, but any type of borrowing necessitates timely payments in order to keep your account and credit score in good standing. While learning how credit works and establishing lifelong money habits, it’s not uncommon for consumers to make a few typical blunders.
That is why it is critical to have knowledge: We looked into how much debt the average American has at every stage of their lives, breaking it down by total balance(s) and kind, using 2019 data from credit bureau Experian, so you can get a big-picture sense of how much Americans are borrowing, and why.
The average American owes $90,460 in consumer debt, which includes everything from credit cards to personal loans, mortgages, and student loans.
Knowing where you stand can help you decide where to go next on your financial journey, in addition to remaining informed about financial planning, reading advice on saving for retirement, and mastering credit card basics.
saw Americans repay over $80 billion in credit card debt.
In 2020, consumers in the United States repaid up to $83 billion in credit card debt. The amount was mostly due to COVID-19, which drove households to focus on saving rather than spending, according to personal-finance site WalletHub, which released the statistics. While statistics show that the epidemic has reduced credit card debt in the United States, analysts predict an increase in consumer spending as more individuals are vaccinated and restrictions are relaxed.
Credit card interest rates on all accounts were about 14.75% in Q1 2021.
According to credit records, the accounts’ assessed interest rates were considerably higher, at 15.91 percent. In 2016, the average interest rate on all credit card programs was around 12.35 percent, while interest-bearing accounts were at 13.56 percent. In Q1 2020, the figures were 15.09 percent and 16.61 percent, respectively.
The USA has the highest average national credit card debt.
The median credit card debt in the United States in 2020 was compared to the debt in nine other countries around the world by Shift Processing. According to global credit card debt figures, the United States is in the lead, with an average debt of $5,331. Canada ($4,154), the United Kingdom ($3,245), and Japan ($2,900) follow. Germany ($2,052), France ($1,616), and China ($1,728) are all included in the comparison. Italy ($811), Brazil ($497), and India ($302) are the three countries with the lowest average national credit card debt.
What is the average credit score in America?
According to VantageScore data from February 2021, the average credit score in the United States is 698. The idea that you only have one credit score is a misconception. You actually have a lot of credit scores. Checking your credit ratings on a frequent basis is a good practice.
At what age should you be debt free?
In 2018, Kevin O’Leary, a “Shark Tank” investor and personal finance book, stated that the best age to be debt-free is 45. According to O’Leary, you enter the second half of your work at this age and should therefore increase your retirement savings to ensure a good retirement.
While following O’Leary’s recommendations would put you in a good position to retire in your mid-60s or sooner, the decision to pay off debt is complicated, especially for homeowners (more on that below).
If you have high-interest debt, such as credit card debt or an auto loan with an annual percentage rate in the double digits, it makes sense to follow O’Leary’s suggestion and pay it off as quickly as possible. Keeping a credit card balance may easily cost you hundreds of dollars in interest and take years to pay down unless you prioritize a strategy.
What is the largest source of debt?
The article indicates that around 18% of Americans have medical debt that is in collections, based on 10% of all credit reports from the credit rating organization TransUnion. Unpaid medical bills become the main source of debt owed to collections agencies between 2009 and 2020, according to the experts.
How much debt is Canada in?
The obligations of the government sector in Canada are referred to as “government debt” or “public debt.” The market value of financial liabilities, or gross debt, for the consolidated Canadian general government in 2020 (the fiscal year ending 31 March 2021) was $2,852 billion ($74,747 per capita) (federal, provincial, territorial, and local governments combined). In 2020, gross debt as a percentage of GDP was 129.2 percent (GDP was $2,207 billion), the highest amount ever recorded. The federal government’s debt accounted for about half of all debt, or 66.4 percent of GDP. The large deficits ($325 billion) generated to support multiple relief measures, particularly in the form of transfers to people and subsidies to businesses during the COVID-19 epidemic, drove the increase in debt in 2020.
The impact of historical government deficits is mostly reflected in changes in government debt over time.
When government spending surpasses revenue, a deficit occurs.
Because the beneficiaries of the goods and services provided by the government today through deficit financing are typically different from those who will be responsible for repaying the debt in the future, deficit financing usually results in an intergenerational transfer.
(Borrowing for a one-time purchase of an asset that supplies commodities and services in the future that are matched to the loan repayment expenses, for example, issuing debt today that is repaid over 50 years to finance a bridge that lasts 50 years, would not result in an intergenerational transfer.)
What happens if United States defaults on debt?
The government will be unable to borrow extra funds to meet its obligations, including interest payments to bondholders, unless Congress suspends or raises the debt ceiling. That would very certainly result in a default.
Investors who own U.S. debt, such as pension funds and banks, may go bankrupt. Hundreds of millions of Americans and hundreds of businesses that rely on government assistance might be harmed. The value of the dollar may plummet, and the US economy would almost certainly slip back into recession.
And that’s only the beginning. The dollar’s unique status as the world’s primary “unit of account,” implying that it is widely used in global finance and trade, could be jeopardized. Americans would be unable to sustain their current standard of living without this position.
A US default would trigger a chain of events, including a sinking dollar and rising inflation, that, in my opinion, would lead to the dollar’s demise as a global unit of account.
All of this would make it far more difficult for the United States to afford all of the goods it buys from other countries, lowering Americans’ living standards.
