The average American household had over $15,300 in debt in 2015. Credit cards, which often carry high interest rates, accounted for about $5,747 of that debt. Considering that the average household earns about $54,500 per year, this is a sizable amount that can make it nearly impossible for people to free themselves from debt.
The problem with debt becomes more pronounced when you look at how much interest consumers pay. The typical credit card account charges over 15 percent. People with bad credit face even more difficulties since lenders charge higher interest rates to protect themselves from default. If you have bad credit, then there is a good chance that your credit card company charges you over 20 percent in interest. That adds up quickly.
The good news is that not all credit comes with high interest rates. Secured credit, such as mortgages and auto loans, are often considerably more affordable.
Still, having a large amount of secured credit can negatively affect your credit score. That means you may have to spend higher amounts on car insurance and deposits for utilities. To put it plainly, life is difficult for people who have large amounts of debt, whether it’s secured or unsecured.
These numbers show that many Americans clearly need to find more effective ways to eliminate debt from their lives. Otherwise, they could continue to lose money to higher expenses and interest payments.
Not all is lost, though. By taking a strategic approach, you can take control of your debt to lower its impact on your life. The right approach will even help you pay it off completely.