Consumers Owe $2.5 Trillion in Non-mortgage Debt
6 October 2007: Credit card users bought 6 percent more in August 2007 than one year ago according to the September 2007 figures released by the United States government. Outstanding consumer debt increased $12.2 billion, pushing the total outstanding consumer credit to $2.47 trillion. The government revised its July's overspending figure up by 13 percent to $9.6 billion.
While credit card debt is up 121 percent since 1990, a little more than half of all consumers in the United States do not hold credit card debt and about one quarter of consumers do not report owning a credit card. For the roughly 172 million credit card holders then the average total debt per charge-it-up consumer is about $14,000.
Revolving debt climbed 8 percent in August or by $6 billion. Student, personal, and non-revolving debt rose 5 percent to $6 billion as well.
Credit card companies reported a 30 percent increase in uncollectable payments during the first half of 2007. Roughly 5 percent of the total monthly bill accounts for this figure.
But there is good news now as consumers can charge-up even more following the prime rate cut in September. CreditCards.com reported that variable interest rates slid during the week following a rate cut by the Federal Reserve Bank in the United States.
The rate reductions should result in slightly lower finance charges on any revolving balances, the website showed.
A majority of banks index their credit card APRs to the prime rate, so the prime rate cut of 18 September should result in decreased interest rates for consumers in the near term. According to the Federal Reserve, 54 percent of card issuers tie card interest rates to prime, with most banks adjusting variable rates 30 days or one billing cycle after a change in the prime rate.
Among the popular credit card categories tracked by CreditCards.com, bad credit, airline and student credit cards charged the highest average APRs.
Credit Card Rate Averages by Creditcards.com for October 2007
Low Interest || 11.86%|
Balance Transfer|| 11.93%|
Cash Back || 12.63%|
Business || 13.90%|
Instant Approval|| 13.61%|
Reward || 13.77%|
For Bad Credit || 14.12%|
Airline || 15.59%|
Student || 16.80%|
Nellie Mae, which originates federal and private education loans, concluded in a study titled Graduate Students and Credit Cards in 2006, that the average credit card balance of graduate students rose 10 percent from three years earlier to $8,612. Typical charges included textbooks and tuition.
Those between 22 years old and 29 years old carry an average of $6,479.
The study found those graduate students between 30 years old and 59 years old carry an average of $12,593 in credit card debt. The older students are more on the fast-path through college and have little if any outside financial assistance other than credit cards. Twenty percent of graduate students pay off monthly balances, which is less than half the percentage of those in the general population.
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