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Average Credit Card Debt and Statistics

Display of multiple credit cards fanned out on a flat surface.

Credit card debt is an unfortunate part of most Americans’ financial life. On average, American families owe more than $15,000 in credit card debt.

The easiest solution to credit card debt is to pay off our balances and live within our means, right? Well, it might not be that simple for some. Studies show that not all credit card debt is a side effect of poor or irresponsible spending habits. There are many factors that have contributed to the increase in debt over the past few years.

Here’s a breakdown of the major players:  

Cost of Living

According to the Census, American household incomes hit an all-time high in 2016, holding the largest two-year percentage increase on record. Unfortunately, the cost of living in America has significantly outpaced income growth, reaching more than 29 percent from 2003 to 2015. It is easy to see how overspending can become a habitual problem, especially when purchasing the things you need like groceries or paying rent.

Also, you might assume that the poorest states are the ones with the most debt, but that isn’t the case. Actually, the states with the highest debts are the wealthiest. In fact, out of the top 10 states with the lowest average credit card debt, six of them have the lowest median incomes. This is another example of how easy overspending has become for our society.

Something else to take into consideration is that many of the states with the highest debts are the states with the highest cost of living. Goods and services cost more in Alaska than they do in Idaho, meaning Alaska residents have higher credit card debt than Idaho residents. Debt can accrue more easily if the cost of living is significantly higher than in other areas of the U.S.

Availability of Credit

We all want what we can’t have. It’s a human flaw, and credit is no exception. The allure of putting the items you desire but can’t afford on a credit card is nearly irresistible when offered on a silver platter — i.e. no annual fees and grace periods free of interest.) But this silver platter is one of the main factors in the rise of credit card debt among American families.

With the ease of obtaining multiple credit cards, the opportunity to build more debt increases. According to a study by the Federal Reserve Bank of Boston, available credit appears to be the driving factor of American consumers’ debt in both the short and long term. Studies even show that states with the highest credit scores are the states with the highest credit card debts.

Interest Rates

When the silver platter is taken away, higher interest rates are applied to the balance that was accrued during the grace period in which spending is interest-free. For example, if you received a grace period of 18 months, once those 18 months are up, your outstanding balance will have an outstanding interest rate applied to it.

According to the Federal Reserve, the credit card interest rates have risen to a staggering high of 15.59 percent as of mid 2018. Interest rates only seem to be rising, which is not good news for those paying off their credit cards. Whether the debt is $500 or $50,000, higher interest rates make it harder to pay off any outstanding debts.

On average, the American household is paying a total of $6,658 in interest per year. This startling statistic reinforces the need to pay off any debts and move towards a healthier future.

What Should You Do?

If you are struggling under the burden of credit card debt, you are not alone.

For those struggling to make ends meet, it might be time to seek help. At CreditGUARD of America, our certified credit counselors work with you to help you stay on track with your monthly payments and better manage your finances. CreditGUARD will help you set up a budget that works for your unique financial situation, so you can start your journey to a more stable financial future.

It could also be in your best interest to use our debt consolidation program, which offers a proven process for combining your various unsecured debts (like credit cards, medical or military debt) into one manageable payment. With this program, you will work with one of the certified credit counselors mentioned above to redefine your spending habits and create a healthy budget for your future.

If you are interested in one of these options, Call CreditGUARD Today!