Question of the Day: What is The Average Credit Card Balance for American Consumers?
Interpreting data is a critical 21st Century skill. This recent TransUnion research report (first six paragraphs are probably sufficient) would be useful in your credit card unit as it provides details on credit card usage and will help familiarize students with key terms including delinquency (not paying a bill on time), subprime (borrowers with lower credit scores), access to credit and credit card balances (the amount that credit cardholders currently owe on their credit cards).
Here are some questions for students to answer as they review this report:
- The article states that credit card balances grew by 5% over the past year which is the highest growth since 2008. What do you think this says about the state of the American consumer?
- What is the definition of delinquency rate? How has the delinquency rate on credit card debt changed over the past year? Is this rate higher or lower than you would expect? What is one reason you think the delinquency rate might be so low (Hint: Think about the minimum payment).
- Based on the number of consumers with access to credit cards (157 million) and their average balances ($5,327), what is the total amount of credit card debt outstanding? Answer: $836 Billion
- Bonus question: Assuming an average annual interest rate of 14.95%, how much interest would banks earn in a year on these credit card balances? Answer: $125 Billion.
Check out the NGPF activity on how not paying off your credit card bill in full can inflate the cost of what you are buying.
About the Author
Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.