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Comment by bdcravens | Hacker News Reader

I suspect it's because Americans live far more leveraged lives? We finance everything: our phones, our cars, our lawn mowers, our education. The average student loan debt is about $35k. The average household has over $20k in non-mortgage debt. The average credit card has a balance of over $6k; the average retail card over $1800. The average car payment is $400 (used) and $550 (new). You typically walk into a car dealership and drive away in a few hours with a car worth tens of thousands of dollars. And these numbers are increasing every year. With so much hunger for debt, manually underwriting isn't practical for the smallest debts. (at least not based on most businesses like car dealerships who depend on volume and spontaneity)

https://www.fool.com/the-ascent/credit-cards/articles/the-av...

https://www.usatoday.com/story/money/cars/2019/03/01/care-pa...

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> I suspect it's because Americans live far more leveraged lives

That's simply not correct among developed nations. It's an old myth that refuses to die.

The US is in fact on the lower side for the OECD:

https://data.oecd.org/hha/household-debt.htm

Countries in the OECD with households in worse shape than the US:

Spain, Belgium, France, New Zealand, Portugal, Finland, Britain, Ireland, Canada, South Korea, Sweden, Switzerland, Australia, Norway, Netherlands, Denmark.

Scandinavian countries for example have household debt to income ratios that are among the worst. Australian and Canadian households are also in worse shape than the US, despite being generally quite affluent (Australia's household debt to disposable income ratio is 2x worse than the US).

The US is comparable to Japan, and just slightly above Germany on household leverage.

More broadly, wealthy nations tend to have households with more leverage than poorer nations. They tend to have highly functional financial systems that facilitate that, combined with consistent, dependable economies.

Of all the countries in OECE listed, I think ONLY US has crazy expensive medical cost problem.

Just wanted to throw that out there...

I suspect that the high household debt has to do with the fact that those countries all have a high number of home owners that have a loan out for their house.

In Belgium for example all houses bought/built are financed via a loan, which in turn is promoted by the government in the form of a tax deduction. Not getting a loan for a house (even when you have the money available) is simple a bad choice here.

America's not unique in that respect; Canada has the highest consumer debt load out of the G7:

https://www.bloomberg.com/news/articles/2019-03-26/canadians...

>The average credit card has a balance of over $6k;

Wow. That’s insane for an average.

It’s a meaningless metric, as described. I have balances in the tens of thousands on many credit cards, but they’re always paid before interest applies. It’s just an interest free loan for me that offers cash back, ability to dispute payments, and other perks.

What would be interesting is median and mean average of interest accruing credit card debt.

That $6K is the average balance carried forward from one month to the next month (AKA revolving balance), not the balance paid in full [1], so actually its as insane as the parent thought, especially of the median is much higher.

1. https://www.nerdwallet.com/blog/average-credit-card-debt-hou...

That is average debt for those who have revolving credit card debt. I assume this means if 10 people have credit cards, 9 pay them monthly and don’t accrue interest, but 1 person doesn’t pay and owes $6k, then the average balance carried forward is $6k.

I guess I should add to my original comment that not only are median and mean of interest accruing debt relevant, but what portion of credit card users even have an interest accruing balance.

38% of US households carry an interest accruing balance month to month. The $6k figure refers to them. That is still huge. More detailed stats:

https://www.creditcards.com/credit-card-news/credit-card-deb...

Wow, that is a lot more than I expected!

They clarify in paragraph below that the data is from the credit bureaus which incorrectly factor in balances that will get paid off. You have up to 60 days to pay off your credit card debt before it starts accruing interest. It is a debt and counted towards the consumers debt levels even though the consumer could be paying off the debt every cycle. If you use credit card and pay off the card every cycle, you’ll have a revolving debt and you can easily see with credit karma or similar service.

I think your use of credit cards is atypical. How long until your cards accrue interest? If it's greater than 30 days, that's probably the result of more disciplined debt management.

There's some attempt to compare those who carry a balance vs those who pay in full:

https://www.creditcards.com/credit-card-news/average-credit-...

Takeaway is that those who carry a balance and presumably accrue interest tend to have a higher balance.

All cards are pretty much the same in my experience, they have monthly billing cycles, and after the end of the cycle you have roughly 20 to 25 days to pay before it starts accruing interest.

Your last sentence is what I suspect, that many people don’t pay interest, but those who do might be outliers and have a decent debt burden. The type of person that is okay paying credit card interest rates is probably not going to stop at a few dollars of spending and say it’s enough.

But I can’t say anything for sure without data.

> many people don’t pay interest, but those who do might be outliers and have a decent debt burden

About 38% of US households carry a credit card balance [1], as about 75% of consumers own 1 or more credit cards [2], that puts the number who carry a balance at around 50%.

[1] https://www.creditcards.com/credit-card-news/credit-card-deb...

[2] https://www.creditcards.com/credit-card-news/ownership-stati...

Thanks for citing the relevant facts. Still, though, you were calling lotsofpulp's CC usage (never carrying a balance) "atypical", but that seems like a non-standard application of the term, i.e. for something half of the relevant population does, you know?

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