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Personal Debt

NerdWallet ... American Household Credit Card Debt Statistics: 2015

Burgess COMMENTARY

Peter Burgess

American Household Credit Card Debt Statistics: 2015 You can trust that we maintain strict editorial integrity in our writing and assessments; however, we receive compensation when you click on links to products from our partners and get approved. Here's how we make money. 641783533 The average US household credit card debt stands at $15,863, counting only those households carrying debt. Based on an analysis of Federal Reserve statistics and other government data, the average household owes $7,400 on their cards; looking only at indebted households, the average outstanding balance rises to $15,863. Here are statistics, trends, studies and methodology behind the average U.S. household debt.

Current as of July 2015 U.S. household consumer debt profile: Average credit card debt: $15,863 Average mortgage debt: $156,584 Average student loan debt: $33,090 In total, American consumers owe: $11.86 trillion in debt An increase of 1.9% from last year $901. billion in credit card debt $8.17 trillion in mortgages $1.21 trillion in student loans An increase of 8.5% from last year Deep dive: credit card debt Credit card debt is the third largest source of household indebtedness. Only the mortgage and student loan debt markets are larger. Here are the latest credit card debt statistics from the Federal Reserve: Total Credit Card Debt Average Household Credit Card Debt Average Indebted Household Debt May 2015 $901. billion $7,400 $15,863 Change from April 0.18% 0.11% 0.11% Change from May 2014 3.19% 2.37% 2.37% Change from April, annualized 2.11% 1.31% 1.31% What lower credit card debt means for the economy What does this mean? Credit card debt is holding fairly steady – but whether or not that’s a good thing is up for debate. On the one hand, higher consumer spending puts the economy on a positive track. Higher spending leads to more jobs and higher incomes, which in turn lead to higher spending. However, if wages and employment are improving at this sluggish pace, this might well be an indication that families are borrowing to make ends meet rather than a reflection of a well-founded increase in consumer confidence. Read on for statistics, data, methodology and conclusions on the state of U.S. credit card debt. March 31, 2010 December 30, 2012 Total revolving debt $906.7 billion $849.8 billion Number of U.S. households 116,716,292 119,397,330* Average credit card debt per household $7,768 $7,117* % of households with a credit card balance 43.2% 46.7% Average credit card debt per indebted household $17,630 $15,257 *NerdWallet estimates; see methodology section for details. In March 2010, the last date at which the data can be reliably estimated, we found that: The median American household owed $3,300 of consumer debt; The average American household owed $7,768 and The average indebted American household owed $17,630. Note that the average American household owed far more than the median, and also that the average indebted household owed far more than the average household overall. Such large discrepancies indicate that a relatively small number of households were deeply underwater. Two things stand out: overall credit card debt is down, and the average indebted household is less underwater relative to the average overall than before. Falling indebtedness is largely due to defaults rather than repayment Screenshot 2015-07-09 16.03.36 Between 2006 and 2008, credit card debt rose steadily and reached its height in January 2009, six months into the financial crisis, as unemployment soared and defaults began in earnest. From there, average debt loads took a sharply downward trajectory and dipped below 2006 levels in mid-2010. 2011, however, saw the decline in average debt become a plateau, and debt levels have since then hovered around $15,600. There is a broad consensus on why indebtedness rose during the boom years: low interest rates and easy access to credit brought Americans to take on record levels of debt. However, the data still leaves two questions: Why did indebtedness decline in 2009 and 2010? Why has indebtedness plateaued since then? Why did indebtedness fall in 2009 and 2012? Ideally, debt levels would have fallen because newly frugal Americans paid off their credit card balances. However, a number of not-so-pleasant factors contributed to the decline. In 2010, credit card companies wrote off seriously delinquent debts in earnest, lowering the total amount of revolving credit card debt. The charge-off rate – the percentage of dollars owed that issuers have written off as uncollectable – rose to 10.9% in the second quarter of 2010. This represented an increase of over 300% from the first quarter of 2006, when the charge-off rate was only 3.1%. Charge-offs account for a significant portion of the debt reduction. The graph says it all: between the fourth quarter of 2009 and the fourth quarter of 2010, average household debt fell by $2,722. The speed with which average debt fell indicates that loans were written off, rather than paid off. As a result of those losses, spooked credit card companies tightened their purse strings. Stricter lending standards also contributed to a fall in total credit card debt. Those two factors – fewer loans, made to more creditworthy consumers – are troubling, as they speak to a one-off correction rather than an improvement in underlying factors such as increased income or fiscal prudence. Why did indebtedness plateau in 2011? As the economy limps forward, credit card companies increasingly loosen their lending standards. Confident that consumers will be able to pay off their debts, the issuers allow more people to borrow more money. NerdWallet expects household indebtedness to resume an upward trend in the coming years as creditors become more lenient. Methodology Household indebtedness estimates can only be considered reliable when three sets of data were released at approximately the same time: The U.S. Census, taken by the federal government every 10 years, tells us how many American households there are; The Aggregate Revolving Consumer Debt Survey, taken monthly by the Federal Reserve, tells us how much debt is outstanding, in total; and The Survey of Consumer Finances, taken by the Federal Reserve every 3-5 years, tells us the percentage of families with credit card debt. The last date at which this occurred was March 31st, 2010. To estimate consumer debt in June of 2012, we extrapolated from the following data sets: The 2010 U.S. Census (2 years out of date) The 2009 Survey of Consumer Finances (3 years out of date) We also use the Aggregate Revolving Consumer Debt survey, which is current. Mortgage, student loan and auto loan data come from the New York Federal Reserve’s Household Credit Report. Notes about 2012 data: NerdWallet used a straight-line extrapolation to estimate the number of household units each month, based on census estimates from 2005 as well as official census data from 2010. The percentage of credit card approval rates is updated every few years by the Federal Reserve, and was last published in March 2011 covering a survey period from 2007 to 2009. NerdWallet’s monthly estimates of this figure are based on internal data of credit card approval rates. Average U.S. household credit card debt by quarter, 2006-2014 Quarter Average debt/household Average debt/ indebted household 1Q2006 $7,826 $16,373 2Q2006 $7,926 $16,582 3Q2006 $8,008 $16,752 4Q2006 $8,123 $16,994 1Q2007 $8,237 $17,232 2Q2007 $8,367 $17,505 3Q2007 $8,543 $17,873 4Q2007 $8,740 $18,285 1Q2008 $8,329 $17,425 2Q2008 $8,416 $17,607 3Q2008 $8,440 $17,759 4Q2008 $8,341 $17,874 1Q2009 $8,186 $17,871 2Q2009 $7,963 $17,718 3Q2009 $7,750 $17,582 4Q2009 $7,516 $17,356 1Q2010 $7,281 $16,633 2Q2010 $7,101 $15,910 3Q2010 $6,939 $15,250 4Q2010 $6,816 $14,702 1Q2011 $6,746 $14,461 2Q2011 $6,730 $14,427 3Q2011 $6,708 $14,380 4Q2011 $6,753 $14,476 1Q2012 $6,754 $14,479 2Q2012 $7,224 $15,485 3Q2012 $7,160 $15,348 4Q2012 $7,168 $15,366 1Q2013 $7,101 $15,223 2Q2013 $7,104 $15,229 3Q2013 $7,110 $15,241 4Q2013 $7,126 $15,276 1Q2014 $7,136 $15,297 2Q2014 $7,231 $15,500 3Q2014 $7,286 $15,618 4Q2014 $7,313 $15,677 Average U.S. household credit card debt by year, 2006-2014 Year Average debt/household Average debt/ indebted household 2006 $7,959 $16,651 2007 $8,426 $17,628 2008 $8,832 $18,614 2009 $8,295 $18,623 2010 $7,489 $16,634 2011 $7,094 $15,206 2012 $7,096 $15,211 2013 $7,110 $15,242 2014 $7,241 $15,523