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 owes. 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 June 2016, U.S. consumer debt rose 4.1% to $3.6 trillion. Of this, $2.673 trillion was non-revolving loans, and it rose 2.1%. Credit card debt totaled $960.8 billion, and it increased 9.7% 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 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$2.3712.3%Credit card debt rises since people can't file for bankruptcy, thanks to Bankruptcy Prevention Act
Mar$.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$2.4260.7% 
Sep$.908$1.529$2.4260.5% 
Oct$.911$1.525$2.436-0.3% 
Nov$.917$1.531$2.4480.4%Falling home prices force owners to switch from equity lines of credit to credit cards.
Dec$.925$1.538$2.4630.4% 
2007CardLoansTotalChange Comments
Jan$.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$2.5650.7%Fed began lowering rates. See Historical Fed Funds Rate.
Sep$.978$1.602$2.5800.5% 
Oct$.986$1.607$2.5920.3%Credit card debt rose 8% in the past year.
Nov$.996$1.607$2.6080.3%Loans rose 5% year-over-year. Credit card debt rose 11.5% yoy, higher than the 2006 growth rate of 6.3%, and 2005's rate of 3.1%. 
Dec$1.003$1.614$2.6170.1%Rate at 4.25%.
2008CardLoansTotalChangeComments
Jan$1.009$1.623$2.6320.6%Credit card debt grew 7% in one year, while loans grew 1%.
Feb$1.016$1.631$2.6470.5%Credit card debt was 5.9% higher. It grew twice as fast as in 2005. But total debt only rose 2.4%.
Mar$1.019$1.637$2.6560.3% 
Apr$1.022$1.642$2.6640.3%High gas prices forced consumers to use credit cards, as loan terms tightened. For more, see Gas Prices in 2008.
May$1.021$1.646$2.6670.2%Less credit was offered by banks. Consumers reached credit limits and struggled to make minimum payments.
Jun$1.022$1.650$2.6720.3% 
Jul$1.022$1.653$2.6760.2%Consumers used stimulus checks instead of using credit cards.
Aug$1.020$1.651$2.672-0.1%Debt fell, the first sign of recession. That reversed the 2-year trend where families used credit cards to replace shrinking home equity loans.
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$2.6500.0%Credit card debt fell an unprecedented 13.9% in the past year.
Mar$.987$1.644$2.631-0.4% 
Apr$.982$1.640$2.622-0.3%Credit card debt was 11.3% lower than the year before.
May$.970$1.646$2.6150.4%The savings rate increased 6.9%, the highest since 1993. The opening of new accounts fell 37% during the first three months of 2009 compared with the year before.(Source: CreditCards.com)
Jun$.966$1.633$2.599-.08%This nine-month decline in credit card use was the worst since the Federal Reserve began keeping records in 1943. According to Creditcards.com, 15-20% of the drop was due to bank lowering credit lines. 
Jul$.963$1.632$2.5950.0% 
Aug$.953$1.631$2.584-0.2% 
Sep$.949$1.628$2.577-0.2%Credit card debt dropped 8% in the past year, the biggest dip since the 11.3% drop in April. According to Creditcards.com, the falloff is the direct result of higher unemployment.
Oct$.942$1.632$2.5740.2%Banks reduced their use of teaser rates in anticipation of increased credit card regulations to protect cardholders. Credit card debt dropped 13% in the past year.
Nov$.926$1.631$2.557-0.2%Credit card debt dropped a whopping 18.5%. Credit card delinquency rates are rising, according to Lowcards.com.
Dec$.917$1.636$2.5540.3% 
2010CardLoansTotalChangeComments
Jan$.911$1.632$2.5430.2%Use of credit cards has fallen for the past 12 months, a result of 22 months of job losses and tightened bank lending standards. However, loans for auto, furniture and consumer electronics were up 5% over the prior year. 
Feb$.904$1.630$2.534-0.1%Loans were down 1.6% from the prior year.
Mar$.901$1.637$2.5380.4%Loans rose 3.9%, indicating consumers are sick of the recession and are borrowing to buy the big-ticket items they've done without for the past several years.
Apr$.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$2.5180.4%Falling credit card debt means Americans will buy must-haves, not nice-to-haves. This Shift to Thrift means businesses that provide value for the money did better after the recession.
Sep$.862$1.659$2.5210.5%Credit card debt dropped 12.1%, after falling 7.3% in August. Americans owed $862 billion, less than they did in 2005.
Oct$.856$1.674$2.5300.9% 
Nov$.851$1.680$2.5310.3%Consumers cut back debt in all but one area: student loans. That's because the Federal government loaned triple the amount it did in 2008, thanks to the Stimulus Package and the Health Care Reform Bill. Student loans were $315 billion. 
Dec$.841$1.807$2.6487.6% 
2011CardLoansTotalChangeComments
Jan$.838$1.820$2.6580.7% 
Feb$.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%Credit card debt expanded 5.8% in May to pay high gas prices. They hit $3.96 a gallon before falling in June.
Jun$.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%The Federal government's student loan program continued to be one of the nation's strongest lenders.. For the second month in a row, Americans owed $453 billion in school loans. That was four times greater than the $98 billion in school loans owed in 2007. 
Mar$.842$1.952$2.7940.6% 
Apr$.840$1.966$2.8060.7% 
May$.847$1.979$2.8260.7%Credit card debt rose 11.2%, while loans rose a more reasonable 6.5%. The upswing was in response to an increase in offers sent out by banks. (Source: Fox Business News, Consumers Credit Card Balances Shoot Up in May, July 22, 2012)
Jun$.844$1.999$2.8441.0% 
Jul$.842$2.007$2.8490.4% 
Aug$.847$2.021$2.8680.7%Total consumer debt was $2.868 trillion a new all-time record.
Sep$.845$2.033$2.8780.5% 
Oct$.848$2.047$2.8950.7%Credit cards were used to break new records in Halloween retail sales. 
Nov$.848$2.062$2.9100.8%Shoppers relied more on cash, debit cards, and layaway than credit cards over the Black Friday weekend.
Dec$.846$2.079$2.9240.8% 
2013CardLoansTotalChangeComments
Jan

$.849

$2.092$2.9410.6%Stagnant credit card use is a healthy sign for a country that tried to attain the American Dream on the back of plastic.
Feb$.850$2.113$2.9641.0%Consumer credit rose to a new record, driven by a 10.9% spike in school and auto loans.
Mar$.848$2.120$2.9700.3% 
Apr$.849$2.130$2.9800.5% 
May$.853$2.143$2.9980.6%Shoppers used credit cards like it was 2006, increasing revolving debt by 9.3% in just one month. It's a sign Americans were regaining confidence in the economy.
Jun$.851$2.161$3.0120.8%Half of the $2 trillion in loans is for Federal education loans. Many people complain this debt is unfair to students who still can't get good jobs.
Jul$.852$2.169$3.0220.6%Instead of using their high-interest credit cards, Americans are wisely taking advantage of low-interest loans to finance autos, furniture, and education. 
Aug$.854$2.184$3.0380.7%Rising interest rates prompted consumers to lock in nearly $2.2 trillion in loans. That's because interest rates were still at historically low levels (an average 4.46% vs. 7.02% in 2008).
Sep$.855$2.201$3.0550.8% 
Oct$.857$2.216$3.0730.6% 
Nov$.856$2.227$3.0840.5%Credit card debt barely inched up .6% in November, one reason retailers saw lackluster sales on the Black Friday weekend. 
Dec$.858$2.241$3.0990.6%Credit card debt skyrocketed in December, rising 7%.
2014CardLoansTotalChangeComments
Jan $.860  $2.254 $3.114  0.6% 
Feb $.860 $2.270 $3.129  5.9%Bankrate survey explained why the credit card use is still down. Nearly 1/3 of Americans don't have enough cash in their emergency accounts to pay off their credit card debt. That's the highest percent since 2011. More than half have enough in savings, while the rest (17%) have neither credit card debt nor savings.
Mar $.861 $2.286 $3.147   7.5% 
Apr $.871 $2.303  $3.174  10.0%Credit card debt jumped 12.3%, as Americans fell behind in payments. Student loans were $1.26 trillion, while auto loans grew to $892 billion.
May $.873 $2.320  $3.193    7.3%Credit card debt only rose 2.4%.  
Jun $.876 $2.336  $3.212    7.1%School loans totaled $1.27 trillion, while auto loans were $919 billion.
Jul $.881 $2.353  $3.233   8.5%The Federal government financed $787 billion in school loans.
Aug $.881 $2.368  $3.249   5.2%The government financed $826.2 billion out of $1.3 trillion in school loans. Auto loans were $940.0 billion.
Sep $.883 $2.384 $3.268  5.7%School and auto loans rose 7.1%, while credit card debt was up just 1.9%.
Oct $.885 $2.400 $3.284  5.8%Credit card debt rose 2% to finance Halloween spending.
Nov $.886 $2.415 $3.301  6.5%Shoppers waited until December markdowns, making for a disappointing Black Friday weekend for retailers.
Dec $.890 $2.428 $3.318  4.2%Strong retail sales pushed credit 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%Credit card debt skyrocketed 11.5%, with loans up 6.2%.
May $.903 $2.500 $3.401  5.9%Credit card debt increased 3.3%.
Jun $.910 $2.525 $3.435  9.6%Credit card debt jumped 9.8%, while other loans rose 9.5%.
Jul $.915 $2.539 $3.454  6.8%Loans rose 7%, while credit card use was up 5.5%.
Aug $.919 $2.552  $3.470  5.6% 
Sep $.923 $2.573 $3.496  9.9%Federally-financed school loans boost the total debt.
Oct $.923 $2.588 $3.512  5.8%Credit card debt barely rose despite Halloween spending.
Nov $.931 $2.596 $3.525  4.8%Credit 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 outstanding 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 boosts school loans.
May $.953 $2.668 $3.622 4.1%Banks and credit unions increased their lending.

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