Very Few Pay Their Cards Off. There are 35 million Americans who only pay the minimum payment on their credit cards

The average rate for standard bank credit cards is around 19%

84% of college students have credit cards

Over 173 Million Americans own at least one credit card

Target is in the top 10 issuers of credit cards

The average american has between $30,000 and $40,000 in outstanding credit card debt. How about you?

Typical credit card purchases is 112% higher than if using cash.

Let’s take a look at how we have ended up so heavily in debt as a nation of consumers.

Easy credit

In the past, it was simply too easy for consumers to obtain credit.  Because credit was so easy to get, consumers figured out how to leverage their credit card rewards and balance transfer cards in order to make money. Many tried to perform credit card arbitrage by taking out cash advances and balance transfers from these cards, then investing the amounts into a rising stock market. This was one of those things you’d consider to be a “sign of the times.” Of course, things are different today, but the 2000s was a decade during which our debt ballooned due to these types of products. Subprime loans, jumbo mortgages and other forms of costly debt are inventions of our capitalistic society; these are high-risk financial tools which countless consumers have gambled with, often with dire results.

Need for instant gratification

As a society, we’re impatient. It’s ingrained in us to be able to get immediate access to the things we covet, even if we can’t really afford these things at the moment. We live in a highly consumerist society that encourages materialism and is not ashamed of excess. Have you seen just how huge the portions are served in most American restaurants? It’s all about more, more, more right now! So it’s often the case that funds that should wisely be funneled into highest interest savings account or into high yield savings are instead being used to keep up with the Joneses, a syndrome that many of us harbor, and which has caused many a household to fall into debt.

Lack of financial education

Personal finance isn’t given importance in schools. A lot of us don’t learn about finance while in school and instead are picking it up through experience and trial and error. Unfortunately, this lack of understanding and awareness about money management can make us vulnerable to making many financial mistakes, particularly those that land us in debt.

Lack of accountability

It’s too easy to procrastinate about our finances, go in denial or sweep things under the rug when we get into trouble. But also detrimental is when we can’t take responsibility for our own actions and mistakes. We blame the government or the financial industry for causing the rifts in our economy, but we’re just as guilty about causing the crisis as they are. Both lenders and borrowers contributed to the subprime lending boom, subsequent bust and credit crisis, but guess who’s getting the lion’s share of the blame?

Debt as a cultural phenomenon

In other cultures, debt is heavily frowned upon and is only gingerly used by households. But in America, debt is socially acceptable and ingrained in our culture; it carries no stigma. If bankruptcy, foreclosure, debt and being broke are things we easily accept in our culture and way of life, then these aren’t things we’d readily condemn (or worry about) until too late or until we’re forced to face the painful consequences.

When the economy blew up last year, it prompted the government to start making some changes; they’ve since introduced policies that help regulate the financial industry to some degree (e.g. credit card rules) but in many respects, it’s still pretty much “business as usual.” Instead of worrying about what the Fed or Obama is going to do next, we should focus on the things we have control over, and take responsibility for our own financial predicaments.

Before a new law of reforms becomes effective in February of 2010, Credit card companies are raising interest rates, penalties and fees. As of July, interest rates spiked an average of 20% across the board from December 2008 with some issuers raising the interest rates 30 and even 50 percent. When the Pew Health Group examined credit cards offered by the twelve largest banks, they found :

99.7 percent of bank cards allowed the issuer to raise interest rates on outstanding balances by changing the account agreement unilaterally – up from 93 percent in December 2008.

95 percent of bank cards allowed issuers to apply payments in a manner that the Federal Reserve found likely to cause substantial monetary injury to consumers.

90 percent of bank cards had penalty interest rates that could be triggered by late payments or overlimit transactions. All but 10 percent of these cards had penalty repricing terms that would qualify as “hair trigger” under Federal Reserve guidelines – triggers of one or two late payments in 12 months

99 percent of bank cards included a late fee – median $39.

80 percent of bank cards included an overlimit fee – median $39.

The median bank penalty interest rate was 28.99 percent. Most – 90 percent – penalty rate increases could continue indefinitely even if the cardholder resumes.

The first payment-based debt for the average American gets incurred while still in high school.

Interest rates on department store cards can be as staggering as 33%.

Target is in the top 10 issuers of credit cards.

Over 173 Million Americans own at least one credit card.

The average rate for standard bank credit cards is around 19%

Only 2% of undergrads have no credit history

The average undergrad has $3,200 in credit card debt.

84% of college students have credit cards.

Med School graduates leave school with an average of $113K in debt.

Doctoral students amass another $29,000

On average, master’s degree students take on an additional $17,000 in student loans.

Half of all college graduates 4 or more credit cards

The average graduate student has $8,600 owing on his/her credit cards.

¾ of American households have multiple credit cards.

The average student amasses over $20,000 in student debt toward his/her first degree.

The average auto loan is $30,738, a 40% rise in the last 10 years.

Most auto loans are over 6 years in length.

This is double the loan term of a typical auto loan 25 years ago.

The average auto loan interest rate varies between 7% and 9%.

The average home mortgage costs around $240,000.

After 30 years of making payments, a homeowner with a $240,000 mortgage loan will have paid over $580,000 on his/her house.

Two-thirds of all American households own 2 or more automobiles.

Most Americans use loans to finance every vehicle they drive.

By age 60, the average American has 5 or more credit cards.

The average household in America with credit card debt is $10,637.

The median credit limit on family credit cards in America is $18,000.

Refinancing a mortgage is often an attempt to consolidate overwhelming debt from a variety of sources.

On average, about half of refinances result in a higher overall loan amount.

The average American has a total of 13 credit obligations right now.

Over a lifetime, the average American will pay over 600,000 in interest.

You pay your credit card off every month, but happened to miss an auto loan or an electric bill payment.  A single late payment on your credit report can trigger a rate increase.  It is called Universal Default.

0% APR is great, but if you miss a payment, it can revert to a default APR of up to 35%.  There is no going back to 0% after that.

Even when you think you made a payment on your due date, the deadline might be in the morning or afternoon, payments made by 2pm on the due date may still be considered late.

The highest fixed late fee charge is currently $39 but percentage based late fees can cost hundreds of dollars per charge depending on the balance.

Variable rates can change without notice, and even fixed rates can change with 15 days notice.  Your rates and fees can be changed for any reason at any time.

Two cycle billing will ensure your finance charges are much higher if you don’t pay your bill in full every month.

Out of the country?  Be prepared to add a 1%-3% fee to all purchases in addition to a 1% exchange rate fee.

Taking our a cash advance?  Be prepared for a high APR as well as a percentage fee.  Payments made will apply to the lowest APR first.  You will have to pay off the entire balance before paying off the high APR cash advance.

Low minimum payments may sound like a convenience, but the lower the payment, the longer you will have to pay, finance charges piling up every month.

If you transfer a balance to a new card, the limit on the new card may be changed so it’s actually lower than the balance transfer.  This results in a new card that is already maxed out.  The first time you use it, you go over your limit and fees are charged.

Once your credit starts turning south, you will get offers for cards with starting fees.  A card with a $300 limit may come loaded with a Program Fee of $96, an Annual Fee of $48, an account Set-up fee of $56, and a monthly Participation Fee of $8, but charged annualized at $96.  All of a sudden your $300 card has $296 already charged on it.  If you make a purchase over $4 you will be hit with a late fee and possible rate change.

So you have cut up your cards, great, but be prepared to be hit with an inactivity fee.

Now you are up to your eyeballs in debt.  Your cards are maxed out, the APRs are high, and the only new credit you can get is tiny and expensive!

A Lifetime of Debt .