How Much Debt Does the Average American Have?

The classic "This is fine" comic, simulating how many people in debt may feel at any given moment

The classic “This is fine” comic, simulating how many people in debt may feel at any given moment | Gunshow Comic/KC Green

It’s difficult to formulate an accurate picture of the “average American.” As we’ve previously covered, the typical American household or individual doesn’t have a ton of cash on hand — roughly $4,500 in the average bank account — and there is quite clearly a savings crisis going on, with a huge percentage of the population having less than $1,000 in savings.

Still, the term “average American” conjures up visions of a house in the suburbs, a car or two, and a couple of kids — even if that isn’t necessarily a truthful representation of most Americans. This caricature implies that the average household has a certain amount of wealth. While we do enjoy an inflated standard of living compared to much of the world, a lot of that isn’t because we can necessarily afford it.

That begs the question: Just how much debt, exactly, does the average American have? Most of us have some form of debt to our names, whether it be student loans, mortgages, or medical bills. But just how much may surprise you.

The average American household owes a massive amount of money — but it’s not all just frivolous spending. In fact, some debt can be good.

Average American household debt

Debt notices and bills stacking up

Debt notices and bills stacking up | iStock.com

Now, to get an actual figure, we turn to a report released by NerdWallet fairly recently — the 2015 American Household Credit Card Debt Study. According to that report, the average American household has $132,158 in debt.

So, there you have it, the average household debt in the United States is a whopping $132,000. That’s a striking number that sets off all sorts of alarm bells, but you need to dig further into the numbers to get a real feel for how indebted people are. For example, a big chunk of that $132,000 average comes from major expenses, like home loans, car loans, and student loans.

NerdWallet even breaks things down for us:

Household debt

Household debt | NerdWallet

When you look at things this way, it begins to make a little more sense. But there is one type of debt that clearly stands out in this chart: Credit card debt. The average American household, by NerdWallet’s calculations, has more than $15,000 in credit card debt — and economy-wide, consumers owe $729 billion. That’s the kind of debt that can get you in trouble when not dealt with wisely.

The report used data from the New York Federal Reserve, Census Bureau, and a Harris Poll of 2,000 adults, and if there’s one clear takeaway, it’s that household debt has grown primarily because the cost of living has grown as well. It’s grown so much, in fact, that it’s outpaced wage growth, as has been reported many times.

credit card and bill

Credit card bill | iStock.com

People have had to tap into their lines of credit to stay afloat, in many situations. That’s one of the reasons we’re seeing such high levels of credit card debt — when a medical emergency strikes, or someone loses their job, most people don’t have the means to properly deal with it. They’re still trying to play catch-up (again, prices rising faster than incomes) and out comes the credit card.

With that said, there is still plenty of irresponsible spending going on, too.

While some debt is constructive — a mortgage or student loan can be considered an investment — other debts, like credit cards or payday loans, are mostly destructive. It’s spending money you do not have, and ultimately paying more for products or services than you would have otherwise when you account for added interest.

What may be the real issue, however, is the fact that we have so much available credit to use at any given time. A study from the Boston Fed found that people simply can’t say no when they’re offered money to spend, so they take it. This, of course, is how you end up in a housing crisis, or a student loan bubble — you make credit ubiquitous, and more people will take the opportunity.

Follow Sam on Facebook and Twitter @SliceOfGinger

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