One of the reasons I hate the bogus statistic that “the average American has $9,000 in credit card debt” is that it paints such an inaccurate picture of U.S. household finances. (In reality, more than half of American households have no credit card debt, according to the Federal Reserve; the median owed for those that do was $3,000.)
But clearly, plenty of people have big problems with debt, and finances in general. Here are just some of the relevant stats:
- 3.1 million households started the foreclosure process last year, and 861,664 families lost their homes, according to RealtyTrac.
- Over 1 million personal bankruptcy cases were filed in 2008, and the American Bankruptcy Institute predicts 1.4 million more this year.
- 14.5 million people were officially unemployed in May, for an unemployment rate of 9.4%. Some economists expect that rate to peak at just over 10%.
- About 15% of U.S. households, or 17 million families, funneled more than 40% of their incomes toward debt payments in 2007, the latest year for which Federal Reserve statistics are available. The 40% mark is considered a “compelling indicator of distress” by the Fed.
- 28% of U.S. households had “no spare cash” after paying bills in 2005, an ACNielsen poll found.
- About 46% of U.S. households carry credit card debt, according to the Fed. Card debt seems to peak among households headed by people in their 40s; of that group, 14.3% owe $10,000 or more.
To me, the two most worrisome stats are the 15% that owe 40%, and the 28% that live paycheck to paycheck. These are the households who were living on the edge before the recession, and are most likely to tumble off.
My gut feeling is that about a third of U.S. households are in financial distress; for about half of those, the distress is acute.