Almost 80% of American workers live from one paycheck to the next. That study was done about a year before the Coronavirus pandemic.
With so many living on the edge of a financial cliff, more people are charging regular purchases like groceries on their credit cards. If you’re one of them, there are big implications for you and for the economy.
You’ll want to read on because we have a handy guide that tells you what the average credit card debt per person is, the impact on the economy, and what you can do to protect your financial future.
What Is the Average Credit Card Debt Per Person?
The average credit card debt per person in America is about $6200.
How does this impact the economy? The economy is built on consumer spending. Without it, companies can’t be profitable.
Consumer debt can drag the economy down because instead of buying new things, you’re paying off old debt. That’s why governments will try to prop up the economy and encourage consumer spending. They’ll give relief in the form of lower interest rates, tax breaks, and trickle-down economics schemes.
Unfortunately, these schemes aren’t enough of a break for most consumers. They end up trying to keep up and spend more, even if they don’t have the money. That’s why credit card debt and other forms of consumer debt keep increasing.
On top of that pressure, wages haven’t kept up with inflation, making it even more difficult to make ends meet. That’s one of the reasons why groceries are among the most common credit card purchases.
Breaking the Debt Cycle
Too much credit card debt can impact your ability to get a loan or other financial help in the future. Credit cards can impact your credit score in two ways.
The first is whether or not you pay your bills on time. One late payment can damage your credit score and put negative marks on your credit report.
The second is your credit utilization ratio. This is the credit available and the credit used. For example, you have $1000 available on a credit card, and your balance is $900.
That’s a 90% credit utilization rate, which will be reflected in your credit score. You should have a rate of 30%.
You can break this cycle of debt and stop paying high interest rates for your credit card debt. You can start by making a monthly budget and sticking to it.
The next thing you can do is to look at debt solutions like credit card consolidation loans. This is a way to pay off your credit cards at a lower interest rate.
Credit Cards, The Economy, and You
There are more financial pressures on the average person than ever. Earnings have stayed the same while the cost of living has increased. It’s harder to make ends meet and have a high quality of life.
That’s why so many people take on credit card debt and the average credit card debt per person is over $6000. Fortunately, you can take control of your debt and your spending.
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