Consumer Debt Statistics: Causes and Impact

3 Reasons Why Americans Are in So Much Debt

Cut credit card
Many consumers cut credit cards during the recession -- and left them that way. Photo: Chemistry/Getty Images

Definition: Consumer debt is what you owe, as opposed to what businesses or the government owe. It's sometimes known as consumer credit. It can be borrowed from a bank, a credit union, and even the federal government. 

There are two types of consumer debt: credit cards (aka revolving) and fixed-payment loans (aka non-revolving).  Credit card debt is called revolving because it's meant to be paid off each month.

Non-revolving debt isn't paid off each month.  Instead, these loans are usually held for the life of the underlying asset. Although home mortgages are also an enormous debt, they aren't consumer debt. Instead, they are considered to be personal investments in residential real estate.

In September 2016, U.S. consumer debt rose 6.3% to $3.707 trillion. Of this, $2.728 trillion was non-revolving loans, and it rose 6.7%. Credit card debt totaled $978.8 billion, and it increased 5.2% during the month. (Source: Federal Reserve G-19 Report) For more, see Average Credit Card Debt

Why are Americans in so much debt? There are three main reasons: credit cards, auto loans, and school loans. 

1. Credit Card Debt

Credit card debt rose due to the Bankruptcy Protection Act of 2005. That Act made it harder for people to file for bankruptcy. As a result, they ran up credit cards in a desperate attempt to pay their bills.

Most of this was to pay for healthcare. Credit card debt reached its all-time peak of $1.028 trillion in July 2008. That's an average of $8,640 per household. See Healthcare Costs #1 Cause of Bankruptcy.

The recession curtailed credit card debt. It fell more than 10% in each of the first three months of 2009.

During the recession, banks cut back on consumer lending. Then the Dodd-Frank Wall Street Reform Act increased regulations over credit cards, so they tightened credit standards. By April 2011, it had fallen to a low of $839.6 billion.  Despite these decreases, the average American household still owed $7,055 in credit card debt.  For more, see Consumer Financial Protection Agency.

2. Auto Loans

Car loans are normally three to five years. These loans can be paid back with either fixed interest rates or variable rates. If the borrower fails to make payments, the bank will usually reclaim the underlying asset. They've risen so much because people are taking advantage of low-interest rates, thanks to the Fed's expansive monetary policy

3. School Loans

School loans are typically ten years but can be extended to 25 years. Of course, the bank can't claim any asset on school loans. For that reason, most school loans are guaranteed by the Federal government. These loans have low-interest rates to encourage higher education.

The government invests in this kind of spending because the country benefits from a more highly skilled workforce. That could eventually lead to a reduction in the nation's income inequality and a healthier economy

These loans skyrocketed during the recession. Many unemployed people sought to improve their skills. In 2010, the Affordable Care Act allowed the Federal government to take over the student loan program from Sallie Mae, which had previously administered it. The savings meant loans were more affordable, further boosting education loans.

How Consumer Debt Benefits the Economy

The Federal Reserve reports on consumer debt each month. It's important because consumer debt drives the American dream and contributes to economic growth. It allows you to furnish your home, pay for education, and get a car without having to save for them.

As long as the economy grows, you can pay off this debt more quickly in the future. That's because your education allows you a better-paying job, and the cars and furniture you buy create jobs. That creates an upward cycle, boosting the economy even more. 

Average Consumer Debt Statistics Since 2006 (in trillions of dollars)

MonthCredit CardLoansTotal% ChangeComments
2006 Jan$.876$1.495$2.3712.3%Bankruptcy Prevention Act
Mar$.884$1.504$2.4000.5% 
Apr$.890$1.511$2.4110.4% 
May$.897$1.515$2.4110.2% 
Jun$.896$1.504$2.400-0.7%Fed funds rate raised to 5.25%
Jul$.899$1.511$2.4100.5% 
Aug$.905$1.521$2.4260.7%Homeowners switch from equity lines of credit to credit cards.
Sep$.908$1.529$2.4260.5%
Oct$.911$1.525$2.436-0.3%
Nov$.917$1.531$2.4480.4%
Dec$.925$1.538$2.4630.4%Card debt rose 6.3% YOY,
2007CardLoansTotalChange Comments
Jan$.927$1.541$2.4680.2% 
Feb$.932$1.548$2.4800.4% 
Mar$.98$1.555$2.4930.4% 
Apr$.941$1.560$2.5010.3% 
May$.951$1.567$2.5180.5% 
Jun$.954$1.574$2.5280.4% 
Jul$.961$1.584$2.5450.6% 
Aug$.971$1.594$2.5650.7%Fed lowered rates.
Sep$.978$1.602$2.5800.5% 
Oct$.986$1.607$2.5920.3%Credit card debt rose 8% YOY.
Nov$.996$1.607$2.6080.3%Card debt rose 11.5% YOY.
Dec$1.003$1.614$2.6170.1%Fed funds rate 4.25%.
2008CardLoansTotalChangeComments
Jan$1.009$1.623$2.6320.6%Card debt grew 7% YOY.
Feb$1.016$1.631$2.6470.5%Card debt grew 2X as 2005.
Mar$1.019$1.637$2.6560.3%High gas prices forced people to use credit cards. See Gas Prices in 2008.
Apr$1.022$1.642$2.6640.3%
May$1.021$1.646$2.6670.2%Banks offered less credit. 
Jun$1.022$1.650$2.6720.3%Consumers reached limits.   
Jul$1.022$1.653$2.6760.2%Stimulus checks replaced card use.
Aug$1.020$1.651$2.672-0.1%Debt fell, the first sign of recession
Sep$1.015$1.652$2.6670.0% 
Oct$1.020$1.649$2.668-0.2% 
Nov$1.012$1.649$2.6600.0% 
Dec$1.005$1.646$2.651-0.2% 
2009CardLoansTotalChangeComments
Jan$1.008$1.652$2.6600.3% 
Feb$.999$1.651$2.6500.0%Card debt fell a record 13.9% YOY.
Mar$.987$1.644$2.631-0.4% 
Apr$.982$1.640$2.622-0.3%Credit card debt fell 11.3% YOY.
May$.970$1.646$2.6150.4%Savings rate increased 6.9%, the highest since 1993.
Jun$.966$1.633$2.599-.08%9-month decline in card use was the worst since 1943.
Jul$.963$1.632$2.5950.0%Banks lowered credit lines
Aug$.953$1.631$2.584-0.2% 
Sep$.949$1.628$2.577-0.2%Drop in card use is due to high unemployment.
Oct$.942$1.632$2.5740.2%Banks reduced use of teaser rates, fearing future regulations. 
Nov$.926$1.631$2.557-0.2%Card debt fell 18.5% as delinquency rose.
Dec$.917$1.636$2.5540.3% 
2010CardLoansTotalChangeComments
Jan$.911$1.632$2.5430.2%Loans rose 5% YOY. 
Feb$.904$1.630$2.534-0.1%Loans fell 1.6% YOY.
Mar$.901$1.637$2.5380.4%Loans rose 3.9%.  Consumers were sick of the recession and borrowed to buy the big-ticket items they've done without for the past several years.
Apr$.896$1.635$2.531-0.1%
May$.887$1.636$2.5230.1%
Jun$.880$1.642$2.5230.4%
Jul$.874$1.643$2.5170.1%
Aug$.868$1.650$2.5180.4% 
Sep$.862$1.659$2.5210.5%Credit card debt lower than in 2005.
Oct$.856$1.674$2.5300.9%Student loans rose as govt. loaned 3X its level in 2008. Due to the ARRA and ACA.
Nov$.851$1.680$2.5310.3%
Dec$.841$1.807$2.6487.6%
2011CardLoansTotalChangeComments
Jan$.838$1.820$2.6580.7%Stagnant credit card use is a healthy sign for a country that tried to attain the American Dream on the back of plastic.
Feb$.836$1.834$2.6700.7%
Mar$.838$1.838$2.6750.2%
Apr$.834$1.846$2.6800.5%
May$.837$1.851$2.6890.3%Card debt rose 5.8% to pay high gas prices.  
Jun$.839$1.860$2.6990.5%
Jul$.838$1.883$2.7211.2% 
Aug$.838$1.875$2.713-0.4% 
Sep$.839$1.884$2.7230.5% 
Oct$.840$1.886$2.7260.1% 
Nov$.843$1.901$2.7430.8% 
Dec$.843$1.915$2.7570.7% 
2012CardLoansTotalChangeComments
Jan$.842$1.930$2.7710.8% 
Feb$.843$1.941$2.7830.6%Americans owed $453 billion in school loans. 4X greater than the $98 billion in 2007. 
Mar$.842$1.952$2.7940.6% 
Apr$.840$1.966$2.8060.7% 
May$.847$1.979$2.8260.7%Card debt rose 11.2% due to an increase in bank offers
Jun$.844$1.999$2.8441.0% 
Jul$.842$2.007$2.8490.4% 
Aug$.847$2.021$2.8680.7%Debt hit new record.
Sep$.845$2.033$2.8780.5% 
Oct$.848$2.047$2.8950.7%Record Halloween sales. 
Nov$.848$2.062$2.9100.8%Shoppers used fewer credit cards during Black Friday.
Dec$.846$2.079$2.9240.8% 
2013CardLoansTotalChangeComments
Jan

$.849

$2.092$2.9410.6% 
Feb$.850$2.113$2.9641.0%Consumer credit hit record, due to 10.9% spike in school and auto loans.
Mar$.848$2.120$2.9700.3%Rising card debt shows rconfidence in the economy.
Apr$.849$2.130$2.9800.5%
May$.853$2.143$2.9980.6%
Jun$.851$2.161$3.0120.8%Half of loans is for Fed education loans. 
Jul$.852$2.169$3.0220.6%Americans take loans for autos, furniture, and education. 
Interest rates still at low levels (4.46% vs. 7.02% in 2008). 
Aug$.854$2.184$3.0380.7%
Sep$.855$2.201$3.0550.8%
Oct$.857$2.216$3.0730.6%
Nov$.856$2.227$3.0840.5%Card debt rose 0.6%. Lackluster Black Friday. 
Dec$.858$2.241$3.0990.6%Card debt skyrocketed 7.0%.
2014CardLoansTotalChangeComments
Jan $.860  $2.254 $3.114  0.6%1/3 of Americans don't have enough cash in their emergency accounts to pay off credit card debt. Highest percent since 2011. Half do have enough. 17% have neither card debt nor savings.
Feb $.860 $2.270 $3.129  5.9%
Mar $.861 $2.286 $3.147   7.5%
Apr $.871 $2.303  $3.174  10.0%Card debt jumped 12.3%. Americans fell behind in payments. 
May $.873 $2.320  $3.193    7.3%Credit card debt only rose 2.4%.  
Jun $.876 $2.336  $3.212    7.1%$1.27 trillion in school loans. Auto loans were $919 billion.
Jul $.881 $2.353  $3.233   8.5%$787 billion in school loans.
Aug $.881 $2.368  $3.249   5.2%$826.2 billion in school loans. Auto loans were $940 billion.
Sep $.883 $2.384 $3.268  5.7%Loans rose 7.1%. Card debt rose 1.9%.
Oct $.885 $2.400 $3.284  5.8%Card debt rose 2% for Halloween.
Nov $.886 $2.415 $3.301  6.5%Shoppers waited for Dec markdowns. Black Friday disappointed.
Dec $.890 $2.428 $3.318  4.2%Strong retail sales pushed card debt higher.
2015CardLoansTotalChangeComments
Jan $.887 $2.441 $3.328  3.6% 
Feb $.886 $2.457 $3.343  5.5% 
Mar $.891 $2.473 $3.364  7.6%Loans rose 6.6%, while credit card debt 7.9%.
Apr $.899 $2.473 $3.366  7.6%Card debt rose 11.5%, with loans up 6.2%.
May $.903 $2.500 $3.401  5.9%Card debt rose 3.3%.
Jun $.910 $2.525 $3.435  9.6%Card debt jumped 9.8%. Loans rose 9.5%.
Jul $.915 $2.539 $3.454  6.8%Loans rose 7%. Card use rose 5.5%.
Aug $.919 $2.552  $3.470  5.6% 
Sep $.923 $2.573 $3.496  9.9%School loans boost the total debt.
Oct $.923 $2.588 $3.512  5.8%Card debt barely rose despite Halloween spending.
Nov $.931 $2.596 $3.525  4.8%Card debt rose 8.1% due to Black Friday sales.
Dec $.936 $2.597 $3.533  7.3%Holiday spending boost credited card debt.
2016CardLoansTotalChangeComments
Jan $.938 $2.611 $3.549 4.4%School loans rise.
Feb $.939 $2.620 $3.560 4.4%A rise in finance companies and school loans.
Mar $.950 $2.642 $3.592 9.9%Credit unions made more loans.
Apr $.951 $2.654 $3.605 4.5%Federal government boosted school loans.
May $.957 $2.672 $3.628 7.5%Banks, credit unions, and Fed government increased their lending.
Jun $.966 $2.677 $3.643 4.8%
Jul $.969 $2.692 $3.661 5.9%
Aug $.975 $2.713 $3.687 8.8%
Sep $.979 $2.728 $3.7076.3%

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