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Americans Are NOT In Bad Shape With Credit, Sort Of

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I like Liz Pulliam Weston’s latest article, The Truth About Credit Card Debt because she cites some statistics that fly in the face of conventional thought regarding credit behavior of Americans.

We’ve all heard this before: Americans are in an unparalleled level of revolving credit card debt. The average American household carries more than $9,000 on their credit cards.

Here’s the thing: The statistic is wrong. In reality, most Americans owe nothing — zero, zip, nada — to credit card companies. Half of the U.S. households that do carry balances owe $2,200 or less. Among lower-income households… the percentage with credit card balances has actually declined.

So who do you believe? You want to believe the $9,000 figure because it makes you feel good about your own situation, owing much less on your credit cards. That $9,000 number apparently comes from CardWeb, whose measurements create results that aren’t really applicable to what we’re trying to learn about. It’s explained in the MSN article.

Liz says we’re actually frugal:

25.1% of American households have no credit cards at all — no bank cards, no retail cards, nothing. Another 31.5% of the households the Fed surveyed paid off their most recent credit card bills in full. So together, the households that owed nothing on credit cards equaled 56.5% of the total. Of the households that did carry a balance, the median amount owed was $2,200.

All of this doesn’t mean the picture is great and Americans don’t have a spending problem.

Debt burdens have been climbing. Our “leverage ratio” — the median value of what we owe compared with what we own — is 24% higher than a few years ago. The percentage of disposable income used to pay debts is still near record highs. Bankruptcies set another record in 2005, with 2 million personal filings as filers rushed to beat the implementation of the bankruptcy reform law.

So while people, politicians and bloggers alike, are quick to scare people into believing the state of debt in this country is worse than it is — I’m probably guilty as well — the statistics when you look beyond the superficial paint another picture that’s slightly better.

Updated April 12, 2011 and originally published May 8, 2006.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

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