Credit Cards

Perhaps the biggest indicator of American indebtedness is the fact that, as a nation, we carry about $750 billion in credit card debt on a month to month basis.

This debt does not count balances of those who pay off their credit card in full before the end of every cycle, thereby avoiding interest charges, but still getting cashback or reward points just for using their card.

450 Million

There are about 450 million personal credit card accounts in the United States, to put that in perspective, there are about 227 million adult citizens in the country. That works out to about two accounts per person. Around 30% of the population does not have a credit card, meaning that the average is actually higher among cardholders. While there are stories of people who basically churn credit card cashback rewards with a dozen different cards, those are the exception to the rule that most cardholders carry a balance.

Credit card debt has been rising steadily since 2008, when the recession actually significantly lowered the amount of credit card debt among the population. This was thanks mostly to bankruptcies, account closures, and credit card companies becoming far more strict about credit card offers,.

14.9% Interest Rate

The average interest rate on credit cards sits at just under 15%, far higher than the interest rate for mortgages, student loans, or auto loans. It’s easy to see how even a little bit of credit card debt can force you to make very large payments just to service it. Making minimum payments on $5,000 of credit card debt (by law, your minimum payment needs to cover all of your interest and at least a portion of principal), it could take you up to 18 years to pay it all off and you would have paid more than $6,000 in interest plus the original $5,000 principal.

Some credit card companies will offer generous introductory rates, only to spring a high APR rate on you at the end of the introductory period. Similarly, they may offer you 0% on balance transfers for 12-24 months (plus a 3% transfer fee), then get you with at least a double digit APR if you do not pay down the balance before the 0% term is complete.