Details Last Updated: Tuesday, 24 September 2019

The latest statistics from the Federal Reserve indicate consumer debt in the United States continues to increase, reaching nearly $4.1 trillion in July 2019. According to statistics published by the Census Bureau, that works out to over $12,374 in debt for every man, woman and child that lives here in the United States.

Anyone thinking that statistic isn't alarming needs to keep this in mind: the $11,944 per person doesn't include debt associated with mortgages.

Consumer Credit

Roughly 27% of all consumer debt (as of July 2019) is termed revolving credit. This is credit that is repeatedly available as periodic repayments are made to lenders. The most common type of revolving credit would be credit card debt.

The other 73% of that debt is derived from automobile loans, student loans, as well as money borrowed to purchase boats, trailers, or even vacations. In fact, these statistics tell us the average new car loan is over $26,700, and the loan to value ratio is 80%. That means new car buyers are using down payments that are 20% of the car's purchase price (last reported 2011).

Debt Payments and Disposable Income

The Federal Reserve also reports what is called the household debt service ratio, or DSR. This is the ratio of all debt payments to disposable income. Current statistics (March 2019) indicate this ratio is now 9.91%. This means consumers spend roughly 10% of their disposable, after tax, income to pay off mortgage obligations and consumer debt such as automobile and personal loans.

A broader measure of consumer debt is the financial obligations ratio, or FOR. This measure adds other financial obligations such as car lease payments, rental properties, property taxes, and homeowner's insurance. The FOR is arguably a better overall measure of how much disposable income goes towards paying off all "mandatory" financial obligations.

As of March 2019, the financial obligations ratio stood at 15.38% for homeowners and renters (national data). This data tells us a typical homeowner spends around 15% of their disposable income just to own their homes and cars. Renters historically outpaced homeowners by over 10%, spending over 25% of their income on these same types of debts.

Credit Card Debt

According to information gathered by the U.S. Census Bureau, there were approximately 156 million credit card holders in the United States in 2009, and that number will remain flat over the next several years. These same Americans own an astounding 1.2 billion cards, an average of eight credit cards issued per cardholder.

Americans charged approximately $1,944 billion to their credit cards in 2009. That's just over $12,500 in charges per cardholder. This information includes all card types such as bank cards, phone cards, as well as those issued by oil companies and retail stores.

This data also tells us Americans carried approximately $886 billion in credit card debt, which works out to over $5,700 in debt per cardholder (not household). Additional information on this topic can be found in our article on credit card debt statistics.

Historical Trends

While $4.1 trillion in consumer credit seems disturbingly high, it might be good to view that number over time relative to other measures such as the growth in the United States population or household income. Data sources used to produce the charts below include the Federal Reserve as well as the U.S. Census Bureau.

The graph below shows the monthly growth in consumer credit from January 1952 through July 2019. This trend is as expected; debt grew slowly through the mid 1970's, and then accelerates through 2019. The great recession seems to have been the only setback, with a slight dip in the curve between October 2007 and August 2009.

This next chart normalizes debt for the growth in the United States population. The graph below shows the total consumer credit per person. Even though the U.S. population roughly doubled between January 1952 (156 million people) and 2019 (329 million), the amount of debt grew from $160 per person in 1952 to $12,374 per person by the middle of 2019.

This last chart considers the growth in household income. The first two charts clearly show the growth of debt, both in absolute terms and relative to population growth. The chart below provides insights into the growth in debt relative to income levels. Here the data focuses on the timeframe starting in 1980, when the growth of debt seemed to accelerate.

The above chart indicates that back in 1980, the consumer credit per person was $1,540, which was 7.3% of the average household income of $21,100. In 2019, consumer debt was $12,374 per person, which was 13.7% of the average household income of $90,021. This means debt increased 70% faster than income from 1980 through 2019.

Bankruptcies in America

In January 2008, the American Bankers Association reported credit card accounts that were 30 or more days past due dipped slightly to 4.18% in the fourth quarter of 2007. That's good news because it means more consumers were paying their bills on time.

But even with this decline in late payments, credit card delinquencies were at the third highest level on record. To James Chessen, ABA's chief economist, that can signal financial distress, and he attributes this distress to the rise in gasoline prices as well as rising interest rates.

In January 2010, Fitch Ratings reported the number of cardholders 60 or more days late on payments stood at 4.50%. Cardholders that were 30 days late declined to 5.72%. Both of these values are significantly higher than reported by the ABA back in 2008.

While the rate of bankruptcies slowed down in 2007, that reduction is likely linked to changes in the rules governing these proceedings. According to a report of 2011 bankruptcies in the United States published by the Office of Judges Programs Statistics Division, the average filer earns less than $31,000 a year. These same individuals reported annual expenses of nearly $34,000.

According to the Census Bureaus' 2012 Statistical Abstract, in the four years leading up to the change in bankruptcy law, there was an average of 1,170,000 filings annually. In 2007, that value dropped to 450,000. According to the U.S. Bankruptcy Courts, there were 773,418 filings in 2018.

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