Average U.S. Household Debt is Higher Than You Might Think
Americans have more monthly payments today than ever before. Mortgages, credit cards, student loans, medical bills. You name it, somebody is paying on it. Whether you have just one of these payments or are chipping away at all of them month by month, your debt may be getting smaller at a slower rate than you think.
Halfway through 2017, Americans have already borrowed more money than at the height of the 2008 credit bubble. This has lead to higher debt balances that come with an even bigger debt builder: Interest.
Interest rates, while staying relatively low, and crushing most Americans in debt. Credit card debt is the most commonly known issue with excessive interest rates. With the average credit card balance hovering just under $17,000 per household, the average credit card interest rate of 15.59% adds an additional $2,766.18 a year. With most Americans paying the minimum payment, the interest rates accumulate to amounts quite a bit higher than initially borrowed. Even with the minimum payment, the balance can continue to grow due to the high-interest rate.
Credit cards carry the highest interest rate, but mortgages are the sneaky debt builders in the group. Carrying an average interest rate just under 4%, the damage doesn’t seem as devastating as credit cards. Apply that low-interest rate to the total U.S. mortgage balance of $176,222, and you are left with almost a whopping $7,500 in interest payments annually. At three times the annual cost of credit cards, mortgages can add up to an additional $200,000 or more over the course of a 30-year mortgage.
Choosing debt widely can have a significant impact on your wealth. Low interest-rate options like student loans and car loans can still have a substantial impact on your long term wealth. On Investment Zen, this infographic breaks down the average U.S. debt and some helpful tips on how to break free.
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