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Comment by throwawaykeno | Hacker News Reader

One thing that's unclear for the article: does this include debt that never incurs any interest?

I typically have an outstanding balance in the 3-4 figures on my credit card because I pay for rent, gas, and airline tickets with credit. However, it gets paid off every month. I guess that's technically debt, but it's not problematic or anything...

I feel like the majority of credit card debt is the type of "debt" that I incur every month.

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Your feelings are way off. Most credit card debt is not paid off every month. Not by a very very long shot.

Average credit card debt per U.S. adult, excluding zero-balance cards and store cards: $5,232.43

Average debt per credit card that usually carries a balance: $7,494.44

Average number of cards held by cardholders - bankcards: 2.24

Average debt per credit card that doesn't usually carry a balance: $1,128.44

http://www.creditcards.com/credit-card-news/credit-card-indu...

> Average credit card debt per U.S. adult, excluding zero-balance cards and store cards: $5,232.43

That is amazing and terrifying.

In a country with a GDP per capita (not per adult, to be clear - this includes non-adults) of around $50k, why would you feel that's terrifying?

Because we know that wealth is distributed unequally, and that a scrupulous individual earning $35k gross might have a cash flow under $1k.

The debt is also distributed unequally. Mostly so that those who have more wealth, have also more debt (though not 1:1 of course).

On unsecured credit cards? I doubt it.

Wealthier people are the ones who have unsecured credit cards. Banks apparently have no problem giving me a limit of $50k without any sort of collateral, but my dad can't get a credit card without depositing his entire limit.

I was given an unreasonable amount of unsecured credit when I turned 18, by virtue, apparently, of the fact that I was now 18. It certainly wasn't because I had any stable income or assets.

My point was that larger credit limits typically come on unsecured cards, not secured ones.

For example, I can get a $20k limit card. It's pretty unlikely that you can get a secured card with a $20k limit.

It's not the amount by itself, it's the ridiculous interest rates on top of the amount.

But how much of that debt will be retired without paying any interest? My cards have something like an 18% APR, but I've never paid a penny.

Median is $2,300 which brings this into perspective a bit more.

http://www.valuepenguin.com/average-credit-card-debt

Thanks for this. Was about to go nuts about how useless an average is on this sort of thing.

Well the median is an average so...

And honestly both averages should be presented together, paints a terrifying picture

Median is the middle value of all values in a sequence. Average is the sum of all numbers in a sequence, divided by the count of values.

Take [0,2,100]: average is 34, but median is 2.

nostrebored is just pointing out that the median and arithmetic mean are both averages.

I'm being needlessly pedantic, but yeah.

You're thinking of the mean.

Both median and mean are averages.

The median of a list of numbers is the value that minimizes the sum of absolute differences to each value, sum([abs(median - x) for x in list])

The average of a list of numbers is the value that minimizes the sum of squared difference to each value, sum([squared(mean - x) for x in list])

They're both summary statistics in that they're single numbers used to describe a dataset, but a median is not a "kind of average." The mean is the mean and nothing else.

Incorrect, median, mean, and mode are all types of averages. Usually when people say average they mean the mean, but they're all different kinds of averages trying to identify the central tendency.

"Average: a number expressing the central or typical value in a set of data, in particular the mode, median, or (most commonly) the mean, which is calculated by dividing the sum of the values in the set by their number." -- Google

> Incorrect, median, mean, and mode are all types of averages.

There's a bunch of means (arithmetic, geometric, and harmonic, for instance), and they are all (as well as median and mode) averages.

Though, usually when people say "mean" without further specifics they mean the "arithmetic mean", and usually when they say "average" without further specifics they also mean "arithmetic mean" (though "median" is also fairly common, and "mode" isn't that uncommon.)

Median != mean. Usually, "average" is expected value, or mean.

And its only the tip of the iceberg, read Richard Vague or Steve Keen. Global private sector debt is at historic record levels. It's the sole reason the economy stays sour.

But still, no inflation for us. Nope.

I agree, it is terrifying.

They say the average US household has $15,762 of Credit Card debt.[0] (that's disputed it could be from 5K to 15K depending on what numbers you believe) [1]

With an average rate of 15.07%[2]

Which works out to something like a minimum payment of $600 a month with $188 of it going to interest.

The Average US consumer is not just tapped out but actively being strangled by debt.

"47: The percentage of Americans who can’t pay for an unexpected $400 expense through savings or credit cards"[3]

What this really means is a near majority of the country is on the very brink of bankruptcy one trip to the ER (with insurance) or a tire blowout and down they go.

The terrifying part is that any hint of recession and the ripple effect could take a lot of us down with it.

[0] https://www.nerdwallet.com/blog/credit-card-data/average-cre... [1] http://www.creditcards.com/credit-card-news/images/infograph... [2] http://www.creditcards.com/credit-card-news/interest-rate-re... [3] http://www.federalreserve.gov/econresdata/2014-report-econom...

So what happens when you take away all business related credit card debt? Specifically anyone with a small business or related activity?

I sadly think those numbers are low-balled. But also, everyone complies their stats differently. I have 10 credit cards. I find it strange the average is barely 2. Most people I know hold ~5 but only use 1-2. But I also think the average debt per household is higher too. Since your numbers are 'per us adult'.

Regardless, I think US citizens are carrying way too much debt and...one day, this musical chairs dance will come to a stop. :/

Those numbers are averages. They have a minimum of zero (credit cards don't report positive balances), but their maximum can be large.

The right, most informative conclusion about one $10k balance and 9 $0 balances is that "almost everyone in this group carries no balances, but one carries unmanageable debt", not "the average credit card debt is a manageable but significant $1000".

Statistics guarantees they are guaranteed to be high, not low. Medians and top/bottom percentiles would be more informative.

FWIW, I don't think you or I actually know that many average people. While we've got a pile of no-fee cards with high limits, many people get by with high-interest, low limit cards that have fees attached. Below that there are a lot of people who have to rely on prepaid Visa cards to participate in the cashless economy.

Source: have moved a _lot_ of credit cards through SEM.

I agree based on my post but...I've also read many 'stats' about this issue of US personal debt and have seen various figures range to what the OP wrote to adding a ZERO to each figure. 2.24 >> 22.4 cards. 7,000 debt >> 70,000 debt. Etc. The stats on this topic are just all over the place. Not only do I think 'you nor I' would know the averages, I don't think anyone really has a clue except maybe the FBI/Fed/CIA, if they ever looked into the matter.

One thing I think we can all agree on is that American's are deep into debt and it's not looking good. :/

Ignore these statistics, they're reporting average debt of credit cards. The level of debt per card is not an independent variable. You need to be reporting median debt.

Deeply ignorant question: Is this not of the sort of distribution where those are related, somehow?

While average doesn't mean much, I'm not sure what median debt will tell you either.

To settle the question you'd really need to know how many people carry a balance.

There was an eerily prescient 2006 documentary about consumer credit called "Maxed Out," which featured a scene where someone recalled going to a conference of bank and credit card executives, and one of the CC CEOs plainly stated: "The bulk of our profits come from people making minimum payments for the rest of their lives."

As for "pay-in-full" folks like you and me, credit card companies could care less. Whenever we pay with plastic, they get processing fees.

How do CC companies make money off of minimum payments? Don't they lose money by lending more than what's paid back?

At first, yes, they lose money, but over time the interest charges outpace the original balance by far. And people are still bound by credit limits.

Lenders just want debt service, not principal paid back. Loans are an asset on a bank's balance sheet.

Are they really even lenders anymore? I'll refrain from colorful characterizations of what they might be. Real lenders throughout human history want a nice predictable retirement of the debt so they can use reserve multipliers.

You ever see the new disclosures on a credit card?

It usually says something like: On your $1000 balance, paying only the minimum will take 7.5 years to pay off the balance and you will pay a total of $3500. Pay $35/mo and will pay off your balance in 3 years and pay a total of $1500.

Which is still kind of deceptive considering if you can't pay back that balance immediately, you likely won't be able to go 7.5 years without putting more on.

The issue isn't predatory lending by credit cards (necessarily anymore), it is our obsession with having material goods and "keeping up with the Joneses"... who are also in debt up to their eyeballs.

So, in my mind, it is just a race to the bottom (of your lifetime bank account).

It's banks that do, CC companies primarily just facilitate the data exchange between the parties involved and charge per tx fee.

The way banks make money on those payments is the way any other interest loan payment works - you'll eventually pay what you owe but by the time you're done you paid the original debt + interest.

Actually, the issuing banks will get some of the transaction fees as well, so they make out both ways. The "CC companies" are better thought of as networks (Visa, etc.) and they live mostly on those transaction fees, as you mention. The networks don't issue any cards, and they carry debit and other transactions as well, so not quite right to call them "CC companies".

Probably splitting hairs at this point, but yes, the issuing bank will typically get a per-tx interchange fee from the merchant bank. Merchant bank will charge the merchant to recoup that cost.

Yea 'CC Companies' is not the most accurate term, but when someone uses that term in a casual conversation I typically know what they mean :)

When I came to the US I couldn't figure what "minimum payment" means. It took a while to realize that it's a totally arbitrary amount and really has no meaning for any kind of financial planning. I bet a lot of people think they are paying off their debt by making minimum payments.

It's not entirely arbitrary. It has to cover the interest for the payment period and some portion of the principle balance.

Only paying the minimum will certainly result in paying a large amount of interest.

The "some portion" part is certainly arbitrary. In any case, it's named in a way that people feel safe but they absolutely aren't.

Well the idea is people don't pay off the principle fast enough not to end up maxing out their cards. Then they just apply for new ones. This is why people are in hock for life.

Then come the vultures. Consolidation loans, payday loans, etc.

I don't know if it's a law here, but every account statement I've ever gotten on revolving credit has always included a statement below the minimum to the effect of: "If you only pay the minimum payment, it will take you 10 years, eight months to fully pay off this debt."

When you see that beside a $2000 or $3000 balance, it paints a pretty clear picture of what paying the minimum is doing for you. I think the only way it could be improved is by adding in how much interest you'll pay over that time period.

I do this too, and many Americans probably start with the same tactic or strategy. The problem arises... when problems arise. You start carrying a balance to cover short term issues, which can turn into long-term issues which are made worse by your new high interest credit card debt.

Can confirm. $300 monitor spiraled into $2,500 of debt by the end of college (The downfall was precipitated by that month-long gov't shutdown which I was told not to worry about, "it might be a day or two, if that"... and then I wasn't paid for two months because I was a contractor)

Actually, my anecdotal experience is that there are firmly too camps.

Some people pay off their full balance every month without fail and would never consider carrying a balance.

Others have never paid their full balance. They see the "minimum payment" and think it's a great deal.

As I applied for a mortgage, this question came up - as it pertains to "how much debt do you have?" - and the answer was that I only have as much debt as the minimum payment I must make each month. I told them I always pay in full, they said then you only have $10 in monthly debt ($10 being my minimum payment amount).

Compared to the average American, your credit card usage is incredibly unusual. The average home carries around $15,000 in credit card debt alone.

I find this to be extremely worrying... especially considering the average college graduate starts working with $25,000 in student loans.

From the article: "Even American Express Co., which historically has focused on customers who pay their bills off every month, is now concentrating on lending money to consumers who keep a balance.

Outstanding balances reached nearly $952 billion in the first quarter, ..."

This seems to imply that, by "keep a balance," they mean not paying your bill off every month.

It's pretty great having a few grand in cash to throw around every month, but man do you live in a bubble if you think 'most' people do that.

I make less than 30k/year, so I'm not exactly rolling in it. Although I'm highly unusual because my very realistic earning potential is 3x what I currently make (STEM grad student).

Still, putting only rent on a CC = 1k+/mo where I live.

I wondered the same thing. My balance is typically <$1000, but I've never had an interest-accruing balance.

I would venture to guess that 'your type of debt' [like mine] is actually the minority. Most Americans actually carry a balance, hence why the card companies continue to push/prey as they do.

> I feel like the majority of credit card debt is the type of "debt" that I incur every month.

This is doubtful. The average U.S. household carries about $15k in credit card debt.

How do you pay your rent on a credit card? I'd imagine you do that to get rewards of some kind?

There's a few services that will act as intermediaries for you like https://www.plastiq.com/ which charges 2.5%. I learned about these services on Slickdeals in a discussion on how to quickly rack up credit card reward points. A Google search turns up this list http://www.doctorofcredit.com/complete-list-of-options-for-p... (I'm not affiliated with the author).

Ya, I've seen these. It seems like the fee would likely be more than the value of the reward making it a losing proposition? Just wondering if the OP found a better way.

The land lord I use allows paying with plastic. There is a ~2% fee. It's better than a wash financially, but just barely. But it's net win for me even when it's a wash because I don't have to worry about mailing a check every month.

FWIW in months when I buy expensive plane tickets or make reimbursed purchases I skip paying rent with the CC.

I haven't mailed a rent check in quite some time, my old property management company used paylease to accept online rent payments ($2 fee to pay with ACH, but at least I didn't have to mail a check). My current rental I just pay the property owner directly through Wells Fargo SurePay to her Chase account, works great and no fees for either of us (which makes for a happy me not having to mail a check, and a happy property owner who doesn't have to lose a cent of her rent just to accept payment).

I do not miss mailing checks in, and I do not wish to ever do it again.

If you just don't want to mail a check every month, you don't need to go as far as a credit card and paying a 2% fee. Your bank should have a bill-pay feature, and they will cut a check and mail it on your behalf. Usually this is a completely free service and can be done on an automatic schedule.

These services are routinely awful and incompetent, however. Also, you're relying on the postal service actually delivering the mail, which is often a dicey proposition.

Bank transfers really ought to be easier to do than they are.

I helped a landlord I was working with on other projects set up a basic Stripe form on the website for one of their properties. No subscriptions or automated payments, you can just go to their site and send them money via credit/debit card.

They eat the couple percent in transaction fees. In return, almost all of their tenants now pay online and instead of the property manager chasing people down for money, everyone generally pays on time (or, in a number of cases, early).

Depending on your priorities, "not having to chase people down for money every month" might be worth paying the $500/mo.

It pretty much has to be, by definition, otherwise either the service or the card company would be losing money. It generally only works out if there's a loss leader that you're taking advantage of, e.g. many card companies offer occasional rewards at a loss to encourage people to use the card more in the long term.

How do you make this profitable with a 2.5% service charge?

You only use it to meet the spending requirements for the signup bonus. For example the Slickdeals home page has the Chase Sapphire right now: "50k Bonus Points ($625 towards travel) w/ $4000 Spent in First 3 Months of Account". Other cards have similar spending requirements.

My apartment accepts payments by card, but they pass the processing fees to the renter so it costs like 3% extra, which more than cancels out the CC rewards.

My last apartment had the same option, so I think it's pretty common.

How do you pay rent with credit?

Your landlord accepts credit card payments and you pay him/her with your credit card? No different than any other vendor. Mine charges like 2% or something to cover costs.

"Mine charges like 2% or something to cover costs."

What I meant to ask was, "How do you pay rent with credit (without paying $30-40 each month for the privilege)?"

My last landlord waived the fee if we had it set on automatic bill pay (via the credit card), I'm not sure if the peace of mind was worth the loss, but considering rent was 750 dollars, 2% would have only been 15 dollars. They probably pad the rent a bit to make up for it, but 750 for a 2 bedroom apartment was still a pretty good deal for the area at the time.

My card gives back 2% on everything so that would work out as a wash. (That said my fee would be closer to like 3-5% for paying via cc so I don't...)

Considering it is 2016, many Landlords have some form of payment processor they can use to accept credit card payments.

Love it, as it's how I get a ton of miles / points for money I'm already spending anyway.

With the additional 2-3% that is charged, it comes out to about very similar to purchasing the points directly.

Like Amex SPG costs $157 for 5000 points. If I pay my $1500 rent via my Amex but with an additional $50 premium, after 3 months, I have 4500 points for $150, versus being able to purchase 5k points for $157. If I spend $525, I can get 20k points. So it's better for this particular card to put aside the extra fees paid in rent then purchase the points in bulk at discount than earning the points directly.

Ideally, there's a landlord that doesn't assess an extra 2-3%, then it would totally be worth charging rent on a card.

Wouldn't you (or any other reader here) prefer a system/world/setup where merchants wouldn't charge an extra 2-3% and not have those rewards?

I have been thinking a lot lately on how the credit card rewards/payback and fee split works - I dislike it.

The key is using the right card with the right processor. There are certain cards that earn multiples with certain processors. Personally, I use a card that gives me 3 points per dollar and pay 2.5% in fees… so I'm "purchasing" points for 0.8c per point. Those points are worth 1.5c+ per point, at the very least.

In fact, I just used 75k of them for a first class ticket to Asia. At a "purchase cost" of $600—so I'd call that a sweet deal.

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