Is Credit Card Debt a Myth

Posted on 12. Aug, 2007 by in Credit & Debt

creditcard_myth.jpgAccording to Liz Weston over at MSN Money, the statistics regarding the average American’s credit card debt is a lie.

She cites a GfK Roper poll released in June at CreditCards.com that purported to detail Americans’ relationships with credit cards.

By some estimates, the average American household has over $9,300 in credit card debt. Yet, despite Americans’ concern about their spending habits, few people are willing to own up to their balances: over 90 percent of survey respondents believe they had the same amount (as) or less debt (than) the average American. This makes a revealing statement about America’s complex relationship with credit cards.

Actually, Weston is very vocal about the fact that the average American does NOT have an average of $9,000 of credit card debt. Her arguments can be summed up as follows:

  • The majority of U.S. households have no credit card debt, according to the Federal Reserve’s latest Survey of Consumer Finances. About a quarter have no credit cards, and an additional 30% or so pay off their balances every month.
  • Of the households that do owe money on credit cards, the median balance was $2,200 — meaning half owe more, half less.
  • Only 8.3% of households owe $9,000 or more on their cards.

So who cares what the average American owes to the big ugly credit card companies? According to Weston, it reflects poorly on us as Americans.

But mostly, the myth reflects badly on Americans. Most of us tell the truth, most of us aren’t in denial, and most of us aren’t nearly as stupid as some pollsters would like to think.

But regardless of what the “truth” is, I still believe that Americans are more in debt than they should be. Based on my own unscientific observations of friends and coworkers, most of them are several thousand dollars in debt. And if it’s not credit cards it’s a second mortgage, a new car that they can’t afford, or student loans. The fact of the matter is, Americans are in debt. And if quoting higher credit card statistics scares a few people into paying off that debt… then I consider that a positive thing.

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7 Responses to “Is Credit Card Debt a Myth”

  1. AJ

    12. Aug, 2007

    I agree with you Jason. Americans are in more debt than they should be. I tend to believe Weston that credit card debt is not as rampant as the media portrays, but, as you say, debt through the mortgages, student loans and other sources are probably as bad as the purported credit card average. It makes me wonder if all these reports really mean all debt, but just say credit card debt for simplicity’s or sensationality’s sake.

  2. Pat Veretto

    13. Aug, 2007

    I tend to agree with you, too. $9,300 seems extreme according to what I’ve seen and know about people’s debt. It could be that figure is taking all debt into account as AJ says.

    Americans have too much debt, I don’t think anyone can really argue that point. If that were not so, there wouldn’t be so many bankruptcies or repossessions or two or three or more income families just “struggling to get by.” One can live on very little comparatively if one isn’t paying out so much on debt.

  3. Alexis

    24. Aug, 2007

    It makes one wonder if the stats posted by those polling aren’t projected higher to make the average person feel that it is ok to escalalte plastic debt?

    I am preparing to go back to school and you would be amazed at how many admin. officers to these colleges tell you charge your books/supplies to a cc. If a younger student didn’t have their parents as a financial guide, I can see how that debt could grow out of hand.

    Thanks for posting this article. Alexis

  4. MG

    28. Aug, 2007

    I transferred my credit card debt into a consolidation loan. Does that mean it does not count as credit car debt?

  5. Jason Guthrie

    28. Aug, 2007

    It might not be “credit card” debt, but it’s still “consumer debt” which is the underlying problem. Regardless of where it’s racked up, rising consumer debt brings with it high interest rates and financial problems. Loans for education, a home, a car, etc. are just fine, and are great examples of “healthy debt” but using consumer debt to purchase assets, which are often not needed, should be avoided (IMHO).

  6. Bob

    11. Sep, 2007

    Liz Weston is making too many incorrect assumptions from the poll taken by GfK Roper. The poll was a phone survey. Now if you are in dept up to your eyeballs are you going to be answering the phone when caller ID says “unavaible”,”out of area”,”unkown”, or some really strange number that looks like it might be a debt collector? No. One more thing to consider is did they account for credit card debts that might have been transfered to another loan (i.e. mortage)? Probably not.

  7. Clearly, the first step for many of us should be to dramatically reduce credit-card debt and interest payments. Easier said than done, of course. But think about it. You’ve probably used your credit cards to but furniture, appliances, electronics equipment, and a lot of other great stuff. How much more do you need? Couldn’t you cut up one or more of your credit cards and work out a plan for paying them off? Some experts recommend borrowing against your retirement plan or using a home-equity loan to pay off credit cards. But this strategy only works if you can permanently break only works if you can permanently break the credit card habit, something that not many of us can do. Please follow link to read more…
    http://personal-finance-management.blogspot.com/2007/11/easy-way-to-paying-down-your-credit.html

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