The Average American Owes Less Than $5,000 in Credit Card Debt, a Rare Feat

by Josie Raymond · 2010-08-25 16:10:00 UTC
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In the ever-rare "silver lining" category comes this bit of news about the recession: "Credit card debt drops to lowest level in eight years." What's that? Experts say that people may have the money to pay down their cards because, due to the foreclosure crisis, they're no longer paying pricey mortgages? Sigh. Can't you just take a positive indicator at face value and move on?

In the second quarter of 2010, the average amount owed on bank-issued credit cards like MasterCards and Visas was $4,951, an eight-year low. A year ago Americans were carrying an average of $5,719 on their plastic. The number hadn't been below $5,000 since 2002.

What does it say about fiscal responsibility that both the high and low states are decidedly red? Alaska's free-spenders led the way with $7,148 in credit card debt, while Alabamans set the best example and wisely paid theirs down to an average of $4,753.

What's interesting about credit card debt to me, as opposed to student loans and mortgages, is that it's for stuff. Some critics think that people should find it easy to cut back on stuff, but sometimes stuff means utility bills.

In addition to paying down debt, Americans are also doing a better job paying on time. Less than one percent of cardholders are more than 90 days past due. The delinquency rate hasn't been that low since 2007, before the recession started.

Not surprisingly, the delinquency rate is directly correlated to employment rates. North and South Dakota, which have the lowest unemployment rates in the nation, at 3.6 and 4.4 percent respectively, had MIA credit card holders at rates of just 0.54 and 0.55 percent. In Nevada, which leads the nation in unemployment at a staggering 14.3 percent, 1.5 percent of cardholders hadn't paid in more than 90 days.

For even more evidence that credit card debt doesn't always equal a shoe shopping addiction, consider that retail spending is up at the same time that credit card debt is down. People are still buying, but they're doing it when they can afford it and they're doing it with cash or money from savings. So maybe the silver lining isn't the lowering of debt, but the rise of prudence.

Photo credit: SqueakyMarmot

Josie Raymond has reported from the streets of the South Bronx, written for several magazines that folded (not her fault) and fixed thousands of typos.
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