25 Facts About Consumer Spending and Debt in America

Updated on February 22, 2018
Gregory DeVictor profile image

Gregory is a financial consultant and author. He works in the debt relief industry and writes articles on consumer finance.

Introduction

The average American household has over $155,000 of debt. Liabilities include mortgages, car loans, student loans, credit card balances, medical bills, signature loans, back taxes, and overdraft charges. More than a third of the country is in trouble when it comes to paying bills on time. Recent studies have found that the average American household saves about 3.5 per cent of their annual income while the average Asian family saves over 30 per cent of their yearly earnings. Whether the annual income for an American family is $20,000 or $200,000, they are likely to spend most, all, or more of what they earn.

Why are Americans so deep in debt? According to a recent study by NerdWallet.com:

The rise in the cost of living has outpaced income growth over the past 12 years. While median household income has grown 26% since 2003, household expenses have outpaced it significantly — with medical costs growing by 51% and food and beverage prices increasing by 37% in that same span.

Only three of the major spending categories haven’t outpaced income growth: apparel, recreation and transportation. But apparel and recreation are relatively immaterial expenses; they don’t make up a large portion of the typical consumer budget.

Another reason why Americans are so deep in debt is that many consumers do not understand the difference between good and bad debt. Let’s take a few minutes and differentiate between the two:

Some debt is good. Examples of good personal debt are mortgages, student loans, and financing a car. Generally, good debt is used to purchases goods and services that can increase wealth. For example, student loans enable you to get the education and training today to reap a bigger paycheck tomorrow.

On the other hand, some types of debt are bad. Examples of bad personal debt are credit cards, payday loans, and overdraft protection. Why? Bad forms of debt are generally used to purchase goods and services that have no lasting value. For example, credit cards are often misused to finance daily living expenses, clothing, holiday gifts, vacations, or a trip to the casino.

This hub teaches you 25 facts about consumer spending and debt in America.

25 Facts about Consumer Spending and Debt in America

Here are 25 facts about consumer spending and debt in America:

1. What is the average family budget? According to the Consumer Expenditure Survey conducted by the U.S. Bureau of Labor Statistics, the average household income in the U.S. was $63,784 in 2013. Here’s how the average household budget breaks down:

Housing - $10,080

Transportation - $9,004

Taxes - $7,432

Utilities and other household operational costs - $7,068

Food - $6,602

Social Security contributions, personal insurance, and pensions - $5,528

Debt payment or savings - $5,252

Health care - $3,631

Entertainment - $2,564

Cash contributions - $1,834

Apparel and services - $$1,604

Education - $1,138

Vices - $775

Miscellaneous - $664

Personal care - $608

Total - $63,784

If you're an average American, you spend $1.26 for every $1.00 that you earn. For example, if your annual income is $50,000, you spend $63,000, a difference of $13,000. If your annual income is $75,000, you spend $94,500, a difference of $19,500. If your annual income is $125,000, you spend $157,500, a difference of $32,500. And so forth.

2. Low income families earn less than $59,410 annually while middle-income ones earn between $59,410 and $102,870. High income families earn more than $102,870 a year. Households earning less than $50,000 annually are more likely to use credit cards for daily living expenses and financial emergencies.

3. According to CreditDonkey.com, "An estimated 38 million households in the U.S. live hand to mouth, meaning they spend every penny of their paychecks. Surprisingly, two-thirds of them earn a median income of $41,000, which puts them well above the federal poverty level."

4. The average mortgage debt is nearly $170,000.

5. The average student loan debt is about $50,000. Nearly 70% of college graduates have outstanding student loans and over 25% of them are late with their payments or are missing payments altogether.

6. According to the U.S. Census, about a third of all owner-occupied homes are mortgage-free.

7. The average American household has over $16,000 of credit card debt.

8. According to a recent study, over two-thirds of American families carry credit card balances from month to month.

9. The average household is paying nearly $7,000 in credit card interest every year. This is about 9% of their average annual income.

10. NerdWallet.com tells us that consumers vastly underestimate or underreport how much credit card debt they have. For example, actual lender-reported credit card debt in 2013 was 155% greater than borrower-reported balances.

11. The average auto loan is over $27,000.

12. American's aged 35-44 have the highest rate of bankruptcy. Young Americans aged 25-34 have the second highest rate.

13. A study by the management company CESI shows that 80% of married couples spend money behind their spouse's back and another 18.5% have opened a credit card without their partner's knowledge.

14. Nearly 5% of American households have over $20,000 in credit card debt and almost 35% of Americans have debt in collections.

15. Which generation and the best at saving? According to CreditDonkey.com:

Baby boomers tend to do better when it comes to hanging on to their extra money. Adults aged 55 and older have a positive personal savings rate of about 13%.

Millennials, on the other hand, meaning adults who are 35 and under, have a personal savings rate of negative 2%. Between high student loan debt and stagnating wages, saving anything at all proves to be impossible for many of them.

16. How much do your neighbors owe the IRS? Several years ago, a spokesperson for the Internal Revenue Service estimated that 8.2 million Americans owed over $83 billion in back taxes, penalties, and interest. That is approximately $10,000 per person.

17. Many consumers who are deep in debt cannot open a regular checking account because of fraudulent behavior with traditional checking accounts. Fraudulent banking behavior includes bounced checks at retailers and other companies as well as unpaid fees from overdrafts.

18. Payday loans are one of the worst kinds of bad personal debt. According to recent statistics, the average payday loan amount is $392. Chris Morran points out that:

The average payday borrower is not someone with a high-paying job. Only 4% of payday loans are made to consumers earning more than $60,000 per year. Meanwhile, more than two-thirds of payday borrowers have annual incomes below $30,000. The largest chunk of borrowers came from those making between $10,000 and $20,000 per year; this group accounts for nearly one-third of all payday loans.

He adds:

Lenders generally make money on these loans by charging a fixed fee for every $100 borrowed. These fees generally range between $10-20 per $100 borrowed, with the median being $15 per $100. The median APR on a payday loan is 322%, with the average APR being slightly higher at 339%.

Yes, you read that correctly!

19. Nearly 33 million Americans still do not have health insurance. As a result, medical debt is the leading cause of personal bankruptcies in America. NerdWallet reports that:

One in five American adults will struggle to pay medical bills this year. A sudden accident or frightening diagnosis can touch virtually anyone, unleashing mountains of bills even on the insured. In fact, medical bills are the leading cause of personal bankruptcy, a last resort after millions of families have drained their savings, maxed their credit cards and even refinanced their homes.

20. Over 55 million Americans under 65 will have trouble paying medical bills in 2015:

  • Over 35 million Americans will be contacted by collection agencies about unpaid medical bills.
  • Nearly 17 million Americans will receive a lower credit score because of high medical bills.
  • Over 15 million Americans will use up all of their savings to pay for outstanding medical bills.
  • Nearly 12 million Americans will take on credit card debt to pay for medical bills.
  • Nearly 10 million Americans will be unable to pay for basic necessities such as housing, food, and utilities due to medical bills.
  • Despite having year-around insurance coverage, 10 million insured Americans ages 19-64 will face medical bills that they are unable to pay.
  • Nearly 2 million Americans live in households that will declare bankruptcy because of their inability to pay for their medical bills.
  • To save costs, over 25 million Americans will not take their prescription drugs as indicated. They will skip doses, take less medicine than prescribed, or delay a refill.

New rules will limit the hurt from medical debt starting September 15, 2017:

There is now light at the end of the tunnel because of new rules granting consumers some relief from the harm that medical debt can do to their credit worthiness. Theo Thimou tells us that:

Beginning Sept. 15, the three main credit bureaus will enact rules they agreed to back in 2015 that require them to provide a 180-day cooling off period before any medical debt goes onto a credit report.

The new rules attempt to bring order to the chaotic ways that some medical billing offices handle past-due accounts. Certain offices will refer a bill to collections after only 30 days. However, others will wait 60 days before sending an account to collections and still others will wait 180 days.

Giving consumers the benefit of the doubt for a full 180 days will hopefully provide enough time for financial responsibility to be determined between consumers and insurance companies.

It should also provide time for consumers to get funds together to pay balance bills, or to finally address that small medical bill forgotten at the bottom of the mail pile!

21. The 10 states with the most credit card debt are Alaska, New Jersey, Hawaii, Maryland, Virginia, Connecticut, California, New York, New Hampshire, and Massachusetts.

22. The 10 states with the least credit card debt are Mississippi, Arkansas, West Virginia, Kentucky, Iowa, Alabama, Louisiana, Oklahoma, Tennessee, and Indiana.

23. The 10 cities with the most consumer debt per person are Denver, Seattle, Dallas, Phoenix, Atlanta, Portland, Baltimore, Washington, D.C., Houston, and Philadelphia.

24. The 10 cities with the least consumer debt per person are:

  • Billings, Montana
  • Sioux Falls, South Dakota
  • Madison, Wisconsin
  • Honolulu, Hawaii
  • Fargo, North Dakota
  • Lincoln, Nebraska
  • Bangor, Maine
  • Charleston, West Virginia
  • Yonkers, New York
  • Witchita, Kansas

25. According to Coupons.com, here are the 20 U.S. cities with the most frugal shoppers:

  • Atlanta
  • Tampa
  • Cincinnati
  • St. Louis
  • Minneapolis
  • Charlotte
  • Nashville
  • Cleveland
  • Pittsburgh
  • Raleigh
  • Kansas City
  • Washington, D.C.
  • Miami
  • Dallas
  • Oklahoma City
  • Boston
  • Denver
  • Seattle
  • Columbus, OH
  • Wichita

Southerners are among the most frugal shoppers in the country. Eight of America’s most frugal cities--Atlanta (#1), Tampa (#2), Charlotte (#6), Nashville (#7), Raleigh (#10), Miami (#13), Dallas (#14), and Oklahoma City (#15)--are in the South.

Ohio is the most frugal state. Cincinnati (#3), Cleveland (#8), and Columbus (#19) all made the list.

The only city on the West Coast to make the list is Seattle (#18).

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    © 2017 Gregory DeVictor

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