3 ms·
"American have an average of $6,506 in credit card debt, according to a new Experian report out this week." Although credit reporting agencies have a funny way
by cbanek 7y ago
"American have an average of $6,506 in credit card debt, according to a new Experian report out this week."
Although credit reporting agencies have a funny way of calculating debt, which is used for your credit score as well. It's just your current balance, even if you pay it off every month and aren't in "debt". It's hard to tell from the report how they are calculating debt, but I bet it is the amount of money on the credit line waiting to be repaid, even if it isn't costing interest.
Plus, if you wait until the statement due date (which is basically a free extension of the loan, so a good idea, as long as you have automated bill pay that will make sure it makes it right under the deadline), this means that number is likely your past statement plus whatever your current purchases are. You don't control when the credit companies look at your balances, and for mine I was surprised that they were basically reporting 2x my normal revolving credit card usage over the month. I use my credit card for everything if possible, since I get 2% cash back on my Fidelity card (which is great, BTW), as well as great fraud protection and the ability to automatically get an electronic record of every transaction.
The real question is how much of the accounts are delinquent. In the linked report (https://www.experianplc.com/media/news/2019/state-of-credit-examines-credit-scores-decade-after-financial-crisis/ https://www.experianplc.com/media/news/2019/state-of-credit-...) 6.7% of people are 90 days late on their payment.
- magicnubs 7y ago> The real question is how much of the accounts are delinquent Wouldn't how many people are carrying a balance each month (and thus paying interest, implying they very likely can't afford to pay off the balance each month even if they wanted to) be a better measure? The average worker in the US barely nets $6,500 in three months, they're definitely not charging and paying that much off every month.
- cbanek 7y agoSure, you could look at that, but just because you carry a $6,500 balance isn't too terrible as long as you are paying it off. If you're just paying the minimum payments and not charging anything new, it could take many years to pay off that debt. The number might also look very similar for many years, even though you are paying it off. I think that's why people who can't even pay the minimum or aren't paying is a truer sign of economic distress. If you aren't paying off your credit card, it's likely you aren't paying off other debts as well, things like rent or mortgage - or will be soon if things don't improve.
- basch 7y agoWhich gets a little more complicated when some people have grace periods, and others dont because they carried a balance. You cant just use average statement balance. The number to look for would be: average balance subject to interest.
- deleted 7y ago[deleted]
- jdsully 7y agoThere are very few people in America who can pay off a $6,500 credit card bill the same month. $6,500 a month is $78,000 a year and that's before taxes. After rent, 401k, and taxes you'd need to be making $200,000 a year to make that practical. Well over the 90th percentile of income.
- deleted 7y ago[deleted]
- hkai 7y agoSmall correction, it's not a monthly amount but rather the statement amount of last month plus this month's spending, so I'd reduce that number by roughly 25%. I don't argue with your other points.