Sketchy Statistics.

Posted by in Articles, personal finance | 0 comments

The initial purpose of my article was to show that the majority of American’s have very low consumer debt, and that those with debt are throwing off the ‘averages.’ However, what sometimes happens with theories and research, you can be proven wrong! After searching many websites with statistics, I came across one site that showed more current data, contradicting my original position. These statistics stated that slightly under 50% of Americans carry very little debt. A larger portion of Americans carry much more. If you are curious about how I ended up talking myself out of my initial position, be my guest and read on.

I was reading TheSimpleDollar.com the other day and Trent was listing some averages showing figures for consumer debt, house size, and a few other topics. His main point was that statistical averages are just that, averages. Averages take everyone into consideration, and when you see what the ‘average’ American owes in credit card debt the discrepancy lies in those who owe a tremendous amount of debt versus those that don’t have any debt.  I think people sometimes feel that having debt is OK because they are under the ‘average’ amount. (I’ll confess, I was one of these people!) When the reality is they are just the ‘average’ minority, the minority being those with consumer debt.

So, I decided to do some quick research to see how many American’s were free of consumer debt. I also wanted to make a point that falling within that ‘average’ is just another way to continue the debt cycle. The misery-loves-company syndrome is alive and well within the consumer debt world. Here’s how that scenario plays out:

Your neighbor just bought a flat-screen TV at a well-known electronics store. You think you deserve one too. You don’t have the cash, so you apply for the 6 months no finance charge plan and take on another $3,000 worth of consumer debt. No problem! Your total credit card debt, once you add it all up, is under the average American’s $8,000, so you pat yourself on the back for doing such a good job of not over spending.

Here is where the problem lies: thinking it’s okay to carry this much debt because others do.

While researching I came across an article by Liz Pullium Weston which pretty much says the same thing. She used data from CardWeb and FairIssacs for her statistics. According to CardWeb, 55% of American’s have no consumer debt. That is the majority of Americans. Most American’s do carry credit cards, about 74%. And according to the same statistic source, half of  credit card holders pay their balances in full each month. Taking a closer look at the numbers, only 1% of consumers have more than $21,000 on credit cards. This small percentage of people with high consumer debt makes the average much higher than a median figure.  Since averages add up all the numbers, from lowest to highest, the average is heavily dependent on just how much that 1% credit card holders owe.

With a little more research, I found a fascinating article (and more current) that breaks down some more ‘averages’ on credit card debt. The data shows that 43% of Americans spend $1.22 for every dollar they earn. That’s 22% more than what they make. However, the 43% who are spending freely is still less than the majority of Americans.

Wait! Hold it! Another, more recent, article states that only 40% of credit card holders carry less than $1,000 in debt. This completely contradicts my initial statement. I’ve just talked myself out of my original point. I was hoping to shed some light and make people strive to pay down their debt, because they weren’t the majority. I’ll stop babbling now.

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