Credit Card Debt - Are Americans Really Overextended?

Some people think that the media has a liberal bias, while others insist that it has a conservative bias. The truth is that the media has a stupidity bias, and this is most evident when it comes to the subject of economics.

According to media pundits, credit card debt is out of control, and the United States is facing an imminent fiscal crisis because its citizens just can't be disciplined with their credit cards. The solution, they say, is for you to cut up your credit cards and move to the top of a mountain, living the rest of your life as a financial hermit. Unfortunately, the media never stops to consider the prosperity that credit cards have brought to our country. Credit cards give consumers more buying power, which in turn leads to job creation. This creation of jobs produces a more competitive labor market, which pushes up wages and standards of living - but this is all way over the average newsman's head.

Credit cards should not be a "guilty pleasure" - you should not be ashamed of the fact that you like having them and using them. The key is to use them responsibly in a way that benefits you, not the card-issuer. Despite the media hoopla, the truth is that the vast majority of Americans are responsible credit card users.

Average vs. Median Credit Card Debt

If there's one subject by which the media's ignorance of economics can be rivaled, it is statistics. The media loves to repeat the statistic that the average American household has more than $8,000 in credit card debt. The problem is two-fold: 1) It's not true, and 2) The average (mean) is not a very good indicator.

The $8,000 average credit card debt statistic is untrue because it only takes into account households that have credit cards. While the media might applaud the notion that a full 23% of households don't even have one credit card, that statistic is a lot scarier than the $8,000 "average" debt of those that do.

Secondly, when the media says "average" it is actually referring to the "mean," which is the number you get by dividing the sum of all credit card debt by the number of households with at least one card. The problem is that a few households with extremely large balances can easily skew the results. One percent of households owe credit card companies more than $21,000 and 4% owe $10,000 or more, but only 6% actually owe more than the "average" of $8,000, with an astounding 53% carrying $0 balances. Is this really a wide-spread crisis, or more the case of a few people who have fallen in over their heads? We think it's the latter, with the median credit card debt being just $2,000 (meaning that half of households owe more than $2,000 and half of households owe less).

But What if You're One of the Households in Trouble?

This is not to say that credit card debt isn't a big problem for a good 5-10% of households - it is, and it is not at all difficult to get in over your head. If you find yourself in such a situation, there are numerous options available to you, and Debt Relief USA is a great place to find help. Whether credit counseling, debt consolidation, debt settlement, or bankruptcy are right for you depend on your specific circumstances. The important thing is to remember that there is light at the other end of the tunnel. You are not doomed to live a life of frugality and destitution, and no matter how bad your debt or credit situation is right now, you can rebuild your financial life and go on to use credit wisely. The important thing is to develop a positive attitude and seek out the help you need as soon as possible.

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