Self magazine: “What Is The Average American Credit Card Debt?”
Self magazine, October 14, 2021 — Featured in today’s article in Self is Marguerita Cheng, CFP® Pro. Reporter Nick Vasco writes: “You would never have to worry about credit card debt in a perfect world, but things don’t always go according to plan. Emergencies happen. Budgets go by the wayside. Without noticing, you have a significant amount on your credit card bill. You may be thinking:
‘Isn’t it normal to have some credit card debt? How do I know if I have too much credit card debt?'”
That depends on a few factors, says Nick, noting an excellent indicator is your debt-to-income (DTI) ratio, which is calculated by taking all your monthly payments on your credit report and dividing them by your gross monthly income.
He turned to Marguerita for insight about how you know if your DTI is too high.
Rita says: “Having a DTI ratio of 50% and above is considered an unhealthy and unsustainable level of debt… You want to have some money left over at the end of the month, so you can continue to build your cash reserves and pay down debt.”
Other clear signs that you have too much credit card debt include:
- You can only afford the minimum payment.
- Your credit card debt is more than 30% of your credit card limit.
- Credit card companies are rejecting your new credit applications.
Rita adds: “A less clear sign that you have too much total credit card debt is that you can’t see a path out of debt. If that sounds like your situation, it may be time to develop a plan to reduce your debt.”