How Much Credit Card Debt is Normal?

According to data released by the New York Federal Reserve in November 2018, credit card debt is up by $36 billion in the last year. The average credit card balance per borrower in the United States is $5,315, and the total credit card debt in the country is over $1 trillion.

Experts recommend keeping credit utilization between 1% and 10%. This means that if a person has a credit limit of $10,000, they should aim to keep their balance between $100 and $1,000. If the balance is more than 30% of the total credit limit, it may be a sign that the person is in too much debt.

What is Credit Card Debt?

Credit card debt is the amount of money owed to a credit card issuer for charges made with a credit card. This debt is typically subject to interest charges and other fees until it is paid off in full. Credit card debt can be incurred through a variety of purchases, including everyday expenses like groceries and gas, as well as larger purchases like appliances or vacations.

Definition of Credit Card Debt

According to Investopedia, credit card debt is “a type of unsecured liability that is incurred through revolving credit card loans.” This means that credit card debt is not backed by collateral, like a car or a house, and is instead based on the borrower’s creditworthiness and ability to repay the debt.

Types of Credit Card Debt

There are two main types of credit card debt: revolving and non-revolving. Revolving credit card debt is the most common type and refers to debt that can be carried over from month to month, accruing interest charges and fees until it is paid off. Non-revolving credit card debt, on the other hand, refers to debt that is paid off in fixed installments over a set period of time, like a car loan or a mortgage.

It’s important to note that credit card debt can come with varying interest rates, depending on the card issuer and the borrower’s creditworthiness. According to CreditCards.com, the average credit card interest rate in 2022 was around 15%, but some cards can have rates as high as 25% or more.

How Much Credit Card Debt is Normal?

Many people carry credit card debt, but how much is considered normal? There are a few factors that can affect what is considered normal for credit card debt, including income level, age, and other financial obligations.

Factors That Affect Normal Credit Card Debt

One of the primary factors that can affect what is considered normal credit card debt is income level. Someone with a higher income may be able to handle a higher amount of credit card debt than someone with a lower income. Other financial obligations, such as mortgage or rent payments, car payments, and student loan payments, can also affect what is considered normal for credit card debt.

Average Credit Card Debt in the US

According to a 2022 analysis by Credit Karma, the average credit card debt in the US is $7,518. However, this number can vary depending on a variety of factors, including income, age, and location.

Credit Card Debt by Age Group

As the table above shows, credit card debt can vary significantly by age group. Younger individuals tend to have lower credit card debt, while those in their 30s and 40s tend to have higher credit card debt. However, it’s important to note that this is not always the case and individual circumstances can vary.

Credit Card Debt by Income Level

According to the same Credit Karma analysis, those with higher credit scores tend to have lower average credit card debt. Those with scores of 781 to 850 average $3,523 in credit card debt, while those with scores of 601 to 660 have the highest average debt at $8,819. Additionally, those with higher incomes tend to have lower credit card debt.

How to Manage Credit Card Debt

Managing credit card debt can be challenging, but it’s essential to avoid falling into a debt trap. Here are some tips to help you manage your credit card debt. Knowing how much credit card debt is normal does not mean you need to be normal.

Tips for Managing Credit Card Debt

1. Create a budget: Start by creating a budget that includes all your income and expenses. This will help you identify areas where you can cut back on spending and free up money to pay off your credit card debt.

2. Pay more than the minimum: Always try to pay more than the minimum amount due on your credit card each month. This will help you pay off your balance faster and save money on interest charges.

3. Prioritize high-interest debt: If you have multiple credit cards, prioritize paying off the one with the highest interest rate first. This will save you money in the long run.

4. Avoid new debt: Try to avoid using your credit cards while you’re paying off debt. If you must use them, make sure you can pay off the balance in full each month.

Credit Counseling and Debt Management Programs

If you’re struggling to manage your credit card debt, you may want to consider credit counseling or a debt management program. These programs can help you create a budget, negotiate with creditors, and develop a debt repayment plan. However, be aware that some programs may charge fees and can take several years to complete. Make sure you understand the terms and fees before signing up.

Debt Consolidation and Balance Transfer

Debt consolidation or balance transfer can be another option for managing credit card debt. Debt consolidation involves taking out a loan to pay off your credit card debt, while balance transfer involves transferring your credit card balances to a new card with a lower interest rate. However, be aware that these options may come with fees and can affect your credit score. Make sure you understand the terms and fees before making a decision.

How Much Credit Card Debt is Normal Recap

When it comes to credit card debt, it can be difficult to determine what is normal. However, according to Experian, the average consumer debt on credit cards in 2022 was $5,589. This suggests that having some credit card debt is common and not necessarily a cause for concern.

However, it is important to note that what is considered “normal” may vary depending on a variety of factors, such as income, expenses, and financial goals. For example, someone who earns a high income and has few expenses may be able to comfortably handle more credit card debt than someone who earns a lower income and has many expenses.

It is also important to consider the potential consequences of carrying credit card debt, such as high interest rates and fees. While some debt may be manageable, it is generally a good idea to aim to pay off credit card balances in full each month to avoid accruing interest and fees.

Overall, while there is no one-size-fits-all answer to how much credit card debt is normal, it is important to carefully consider your own financial situation and goals when determining how much debt you are comfortable carrying. By staying informed and making informed decisions, you can work towards achieving financial stability and success.