Facts About Household Debt

Household debt has been a problem for many people since ancient times when you could be put in jail for your debts and be owned by your creditors who would consider you chattel until your debts were paid. Today, many people live paycheck to paycheck; and the first time they're faced with extraordinary expenses, they're looking at the prospects of foreclosure, eviction and even bankruptcy.

Credit Cards

At the end of 2009, there were 576.4 million credit cards issued in the United States, according to Creditcards.com. About 60 percent of consumers allow the balance to roll over until the next month. A $100 purchase would have cost about $112 using a credit card rather than cash; and if a person accumulates $1,000 in credit card debt and makes the minimum payment of 2 percent, it would take more than 22 years to pay it off, and it would include about $2,300 in interest. The average family pays almost $1,600 in interest to credit card companies during a given year.

Income

With the staggering amount of debt being accumulated by American households, it's no wonder that over 40 percent of them spend more than they make over the course of a year. And when many of them lose jobs or sustain a devastating illness, they have no recourse but to fall behind on their payments, putting their finances further in jeopardy.

Net Worth

The average 50-year-old American has a net worth of about $40,000, including his home. If that person were to suffer financial reverses, the $40,000 would be used up in no time. Having so little resources is the product of low current savings rates as opposed to an average approaching 10 percent in the 1980s and 1990s. Also, medical costs have skyrocketed and they are the source of many people's debt problems.

Bankruptcy

In 2003, about one of 73 every households filed for bankruptcy in the United States and that figure rises when the economy worsens and more people are out of work. The number of young people filing for bankruptcy is up 50 percent over a 10-year period ending in 2009.

The Good News...or is it?

The Federal Reserve has been tracking household debt since 1952, and each year it has risen. It wasn't until the third quarter of 2008 that it declined for the first time. It's axiomatic that the more savings a household has, the more it can increase its lifestyle. But when there is a recession, people spend less which prolongs economic woes.