NFCC® Poll shows high balances are the new normal for many households while being debt-free remains an elusive goal.
Washington, DC – Nearly three-quarters of all American adults have at least one credit card, and according to the Federal Reserve Bank of New York the average household carries combined balances of $9,600. A January online poll from the National Foundation for Credit Counseling® (NFCC®) showed slightly over half (56%) of the respondents carry $15,000 or more in credit card debt in their household, while only four percent declare themselves to be debt-free.
“There are a number of good reasons to have access to a credit card and just as many reasons for keeping balances under control,” said Bruce McClary, vice president of communications for the NFCC. “As soon as it becomes difficult to afford the minimum payments, accounts run the risk of falling behind and credit scores can take a turn for the worse.”
Because signs of trouble can be detected long before minimum payments are problematic, the NFCC offers the following tips to help with early detection:
Check Credit Usage – Keep an eye on how and when credit cards are being used each month. If there is an increase in the number of times a credit card is used for purchases that had been covered in the past with cash, it could be a sign that credit is filling gaps in the budget. Instead of charging more often, look for ways to trim the budget to keep expenses in line. Online budget calculators can be helpful toward finding answers.
Monitor Available Credit – Each credit card comes with a credit limit, which is the maximum ceiling that a balance can reach before charging privileges are shut down. It is widely recommended to keep a balance as low as possible compared to the limit. This makes payments more affordable and helps avoid running the risk of incurring costly penalties for overcharging. Stay out of trouble by paying off balances as quickly as possible, either all at once or by paying more than the monthly minimum payment.
Count Cards – Plastic should not take up a lot of space in a wallet or purse. Federal Reserve data shows that Americans with credit carry nearly four credit cards on average. Most experts advise carrying less than that. It would be a good idea to consider consolidation when carrying more than a couple credit cards. This makes it less stressful to keep track of payments and balances, which helps make debt management easier.
Making a minimum payment fit comfortably in a budget is not necessarily a sign that debt is under control. It is important to check these key indicators of financial health before the most obvious signs of distress. Online tools like MyMoneyCheckUp® can offer a snapshot of how finances are doing, where improvements can be made, and what can be done to achieve financial stability in the future. When more help is needed, it is best to reach out to a nonprofit financial professional for advice.
The January poll question and responses are below:
Estimating your total household credit card debt, which range below do you fall into?
A. Debt Free 4%
B. $1000-5000 13%
C. $5000-10,000 13%
D. $10000-15,000 13%
E. $15,000+ 56%
Note: The NFCC’s January Financial Literacy Opinion Index was conducted via the homepage of the NFCC website from January 1–31, 2017, and was answered by 3,316 individuals.