The good news for American consumers is that the average US household income has risen over the past decade. The bad news is that so has the average debt based on rising credit card debt and medical debt among other sectors. 

Credit card debt has risen by over 20% in the past five years, and the balance of those cards is projected to hit $414 billion by the middle of this year. Carrying credit card balances as opposed to paying off the balance each month seems to be the new American way. This is especially true of the so-called Millenials with children in the house under the age of 18 years old. 

These parents are far more likely to pay a small portion of credit card interest each month, but rarely attack the entire balance. This “dog chasing its tail” strategy of economics puts these households in dire jeopardy of going deeper in debt and sometimes putting them into collections with the specter of a debt lawsuit crashing their reality.

 

Debt Breakdown For U.S. Households

Debt Category: All debt

Total Owed in the States: $14.3 trillion

Total Owed by the Average Household: $138,000

 

Debt Category: Credit card debt

Total Owed in the States: $414 billion

Total Owed by the Average Household: $6,200

 

Debt Category: Student loans

Total Owed in the States: $1.6 trillion

Total Owed by the Average Household: $47,000

 

Debt Category: Mortgages

Total Owed in the States: $9.8 trillion

Total Owed by the Average Household: $198,000

 

Unpaid balance that creates debt that carries over from one month to the next is called revolving debt and that also carries with it an increasing interest rate. If your family’s average monthly credit card balance is somewhere near $7000, that family would pay over $1200 in interest rates alone per year on that revolving debt.

“The best scenario for any family looking to kept debt to a minimum is to pay off the balance each month,” advises Chantel Grant, Esq., a Senior Partner at the GM Law Firm and legal expert in defending debt lawsuits. “The goal is prevent your debt from getting to the point where a third-party collection service intervenes because then your debt may spiral out of your control.” 

 

Chasing Debt Forever

The average American household would need over a year of frugal financial diligence to pay off a credit card balance of around $8000. Even more dire, 10% of people holding credit card debt will need a decade to pay it completely off and 9% of the American population will never pay it off before the end of their lives.

That’s a lot of debt and even more stress to put on a person’s life. 

Here are some of the reasons why debt keeps growing and will continue to grow:

  • Credit Card Continues To Rise

As inflation rises and the economy worsens, credit companies continue to raise their interest rates.

  • New Parents Are Finding Credit Card Debt More Unmanageable

Parents with at least one child in the household under the age of 18 are incurring credit card debt faster than ever to keep up with rising costs of raising children. In fact, 80% of this demographic admits to having credit card debt, whereas parents who have no children out older kids who have since left the house show credit card debt in less than 60% of the scenarios.

  • Medical Costs Are Rising

Insurance is covering less and costs of medical bills are now outpacing incomes for many American families. According to the Bureau of Labor Statistics and U.S. Census Bureau, medical costs have risen 33% over the past decade while income has grown by only 30%. Those costs keep these unfortunate consumers from making any positive headway toward paying down their debt.

Many consumer advocacy groups advise speaking with debt lawsuit specialists before their debt becomes unmanageable. One such group, the GM Law Firm out of Boca Raton, Florida, admits that there are many ways to successfully fight debt, but one must be aware of the carefully crafted federal regulations designed to defend against the perils of mountain debt.

The Fair Debt Collection Practices Act (FDCPA) is one such law that protects Americans from aggressive debt collection agencies. 

But before getting into a deep debt situation be smart about paying off balances. In addition, before you incur debt and thus decrease your good credit rating, find credit cards that have the lowest interest rates. Some may even defer interest for the first 12 months. In short, only apply for cards that give consumers the longest period for payoff with the lowest annual rate.

When it comes to medical debt, obviously getting private insurance or being covered through your employer is the best way to prevent mounting bills. If those aren’t easily attainable, look to the government programs that might make sense like Medicare or what was once known as Obamacare. 

“Managing your monthly budget is a detail of one’s adult life that should never be overlooked or underestimated,” asserts Chantel Grant of the GM Law Firm. “Saving money rather than owing money is optimal for a peaceful way of living that removes the damaging stress of looming debt.”