According to Experian statistics, America’s total credit card debt is 1.05 trillion as of September 2022, and US citizens’ average credit card debt for the past quarter has been around $6000.
You should have come across the terms inflation, great recession, and economic crisis multiple times over the past few years. In recovering from the pandemic, nations are trying to escape the global economic crisis the world is about to face shortly, as the Centre for Economic and Business Research (CEBR) predicted.
How would this prediction affect someone who has just started their education, business, or personal financing?
Let’s briefly discuss the possibilities of surviving credit card debt and ways to tackle them moving forward.
Important Credit Card Debt Statistics From the Past Year
A blind approach toward a loan or credit card application can eventually leave a bad impression on your credit report. The debt statistics aid you in learning the country’s economic situation based on the credits and debts an average American holds in their account.
- People aged 40-75 (generation X and baby boomers) have the most credit card debt in 2021. The average credit card debt was slightly more than $5,500 for an average American.
- The average debt among college graduates is around $8000, as it is easier to get approved for a loan or credit card while a student.
- There is no significantly greater difference in debt per head among male and female credit card holders.
- 14 Million Americans have over $10,000 in credit card debt.
How Does an Average Credit Card Debt Potentially Affect a Consumer?
If you plan to start a business, are seeking a source to fund your education, or buy a house, the best decision is to go for a loan or a credit card to meet your financial needs.
The information on average credit card debt gives us an idea of how challenging it is to pay off debts while maintaining a good income source. Furthermore, knowing the exact percentage of people in debt should make you question the necessity of a loan or credit card application. If not, you would just be another statistic.
Based on current statistics, you need to be well-versed in handling finances to stay in the long run. So, credit card debt affects your credit score.
Tips to Manage a Credit Card Debt
Did you know that less than 25% of Americans (according to the federal reserve) are debt-free?
With almost 80% of Americans in some kind of debt, you would assume it is impossible to clear off your debt. This is simply not the case.
Here is a list of things to note before applying for a credit card and repaying it:
- It is recommended to pay your monthly bills on time. Avoid making late or missed payments at all costs.
- Avoid multiple credit card applications because your report is given a hard inquiry, which leaves a negative impression on your credit score.
- It is better to track where you spend the most debt, restricting the usage in that area and maintaining sufficient credit card balances.
- Try to get help from a financial institution or an agency to monitor your expense and share a debt management plan.
- Keep your average credit card balance below 30% to ensure good financial health.
How Do Credit Cards Influence Credit scores?
When applying for a new credit card, the lender or credit union will check your credit report and score before approving your request. The request for your credit report is often registered as a hard inquiry that could potentially affect your credit score.
The number of credit card applications is not an issue until you consecutively apply for more cards. The action of applying consecutively informs the credit bureaus that you spend more than you make.
About 83% of Americans carry at least one credit card. Nowadays, it almost feels like this generation is way past using cash as a mode of transaction. This is due to the advice from most experts on social media who suggest that having multiple credit cards can boost your credit score. While the statement is not entirely untrue, you can hurt your credit score by failing to manage your cards properly.
Types of Credit Card Accounts and General Instructions on their Mode of Use
A credit card issuer issues a credit card in the US, namely American Express, Discover, Mastercard, and VISA. The different types of credit card accounts are
- Unsecured credit card accounts
- Secured credit card accounts
The most common credit card account is the Unsecured credit card account that requires no initial cash deposit as collateral. Unsecured credit accounts are easy to get. Your score needs to be in the average to good credit score range.
Alternatively, a Secured credit card account is when the bank or credit union requires an initial deposit as collateral for further approval of the debt. A secured credit card application’s approval rate is considerably higher than an unsecured credit card. Meanwhile, you will be charged higher annual percentages and interest rates.
Ways to Improve Your Credit Score Using Credit Cards
Let’s for a moment step aside from the average credit card analysis and look at the ways to boost your scores using credit cards.
The most important thing is to pay your debt on your credit card regularly. When you display a positive repayment history on your credit report, your chances of a future loan or credit card application increase considerably.
Also, applying for a new credit card includes an interest-free period, which is an added advantage to repay only the debt without paying extra, such as the interest rate, processing fee, or average interest rate.
For more knowledge on credit cards, refer to our articles on pre-qualifying for a credit card and ways to improve your credit score.
A Short Note on Credit Card Debt Forgiveness
Credit card debt forgiveness is when a person’s debt is canceled either due to a debt settlement plan or in the case of bankruptcy.
- In a debt settlement, the person in debt agrees to pay a desirable amount proposed by the lender to clear the debt.
- If your company or credit card debt account has been declared bankrupt, the debt goes away, leaving bankruptcy on your report for up to 10 years. Though it is rare, you could get a clean slate on your finances when you go bankrupt, paving the way to rebuild your credit.
How many credit cards should I own?
There is no maximum limit on an individual’s number of credit cards. However, your credit score takes a hit when you fail to make payments regularly for the number of accounts you carry.
What is the average credit card debt?
The Average credit card debt is the average American’s debt on his/her credit card. According to the Federal Reserve bank statistics, the total credit card balance was $925 billion for the third quarter of last year, leaving an average credit card debt of above $5800 among American citizens.
What percentage of Americans are in some form of debt?
According to financial experts, the average percentage of Americans who are in some kind of debt is almost 80%.
We saw some important statistics related to the average credit card debt and tips on the ways to improve credit scores using credit card debt in this article.
Before stepping into it, understanding the nook and corners of credit card financing is highly recommended. On ignoring it, you must face the consequences of becoming a legal case and losing future qualifications.
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