Scary Stats to Know about Debt

My four-year-old daughter created a game recently that I’ll call “The Raise Your Hand Game!”

At random times, she’ll say something like, “Raise your hand if you have an ‘M’ in your name!”

I raise my hand. Refusing to play along is not an option.

With my hand in the air, she’ll nod in approval that I participated and didn’t lie.

That’s the whole game.

Let’s play. I’ll be the host.

“Raise your hand if you currently have debt!”

Come on, play along. Get those hands up.

Nearly 80% of you should have your hand in the air.

Yup, 8 out of 10 of us have some form of debt. Put another way, just about everyone reading this post has debt. That’s why learning to effectively deal with debt is a core personal finance concept.

For the next couple of weeks in the blog, we’re going to focus on debt so we can continue our progress towards financial independence.

Those of us who can successfully eliminate debt will move closer and closer to financial independence.

Those of us who don’t want to learn will remain debt’s financial prisoner.

As we begin our discussion on debt, let’s start with some scary statistics.

According to the Federal Reserve Bank of New York, total household debt in the United States grew to $18.04 trillion by the end of 2024. That’s such a big number, it’s hard to know what to do with that information.

Let’s break it down by the type of debt:

• Credit card balances increased by $45 billion from the previous quarter and reached $1.21 trillion at the end of December 2024.
• Auto loan balances increased by $11 billion to $1.66 trillion.
• Mortgage balances also increased by $11 billion and reached $12.61 trillion.
• HELOC balances increased by $9 billion to $396 billion.
• Other balances, reflecting retail cards and other consumer loans, increased by $8 billion.
• Student loan balances increased by $9 billion to reach $1.62 trillion.

While these numbers are still too big to comprehend, one powerful conclusion is hard to miss:

In every category, the amount of debt increased from the previous quarter.

This pattern of increasing consumer debt has been consistent for some time now. HELOC balances have increased for eleven consecutive quarters. Credit card balances have increased or remained the same for 10 of the last 11 quarters.

Now, let’s look at the statistics on a per household basis.

Per household, we see the same picture of increasing consumer debt in the United States.

According to an Experian report that compared consumer debt per household from 2023 to 2024, we see that:

• Credit card balances increased 3.5% to $6,730.
• Auto loan balances increased 2.1% to $24,297.
• Mortgage balances increased 3.3% to $252,505.
• HELOC balances increased by 7.2% to $45,157.
• Student loan balances actually decreased by 9.2% in 2024 to $35,208. This one’s an outlier due to federal loan forgiveness programs.

Let’s look closer at credit card debt for a moment.

According to a recent survey looking at credit card debt in 2024 by Bankrate.com:

• 48% of credit card holders carry a debt balance, an increase of 9% since 2021.
• 53% of the people have been in credit card debt for more than a year.
• The main causes of credit card debt are unexpected medical bills (15%), car repairs (9%) and home repairs (7%).

According to another Bankrate.com survey, 33% of Americans report they have more credit card debt than emergency savings.

These last couple stats helps us begin to understand why so many people fall into debt in the first place. It goes back to our previous conversation about the importance of emergency savings. When we don’t have savings, the first place we turn is to our credit cards.

Consumer debt is a worldwide problem.

While the above statistics are specific to the United States, you’re not off the hook if you live elsewhere. In fact, the data in your nation may be worse.

Any readers in Denmark, Norway or Switzerland?

According to a recent study by Compare the Market, these three nations lead the way with the highest household debt. The same study ranked the United States at number 18.

What can we learn from these scary debt statistics?

Whether we look at the national figures or per household numbers, the picture is clear.

Worldwide, we have a consumer debt problem. And, it’s getting worse.

For most of our conversation on debt, we’ll focus on credit card debt. Most everyone agrees this is the worst kind of debt to have. It’s also the type of debt that’s the most relatable applicable to many of us, regardless of where we are in our careers.

Before we go any further, it’s important to understand the two main reasons why I share studies like these about debt.

1. If you are currently in debt, please know that you are not alone.

These scary stats make it abundantly clear that many of us are struggling with debt. You probably don’t know if your friends and family are in debt because we’ve been brainwashed not to talk about money.

As you know, I’m on a mission to change that.

Nearly half of us in America are burdened with credit card debt. And yes, it is a heavy burden. There’s no sense in trying to convince yourself that you’re not worried about it.

The good news is there are proven strategies for getting out of debt that we will learn in upcoming posts.

These strategies are not hard to implement, but they are challenging to stick with. Temptation to overspend is everywhere. To succeed in eliminating your debt, you need to have strong motivations.

Personal finance always come back to your money mindset. Just like with budgeting, I can give you proven techniques and strategies.

If your money mindset is not in the right place, it won’t matter. You’ll stay in debt, or worse, your debt will continue to increase.

2. If you think you are immune from falling into debt, think again.

When we are presented with statistics like this, it’s not uncommon for us to be in denial. We might say to ourselves:

“No, I understand that other people are in debt. But, that won’t happen to me.”

Or, “No, I make good money. I can pay off my credit card debt if I really wanted to.”

If it were really that easy, then why do half of Americans carry credit card debt? Why is our credit card debt growing instead of shrinking?

You may not currently be in credit card debt, and that’s a very good thing. But, what if one of those emergencies mentioned above surfaces in your life?

• If you were hit with a large, unexpected medical bill, could you cover it without credit cards?
• What if your roof needs to be replaced? Or, your furnace breaks during the middle of winter? Do you have tens of thousands of dollars saved to cover these necessary expenses?
• Do you own a car? How awful is that annoying “Check Engine” light? A simple trip to the mechanic could be another few thousand dollars out of your pocket.

These types of financial emergencies do not discriminate. Each one of these situations could happen to any of us at any time. Let’s not forget that 90% of us are not completely satisfied with our savings. That means almost all of us would have to turn to credit cards to cover these emergencies.

Ending up in debt might come as an unpleasant shock to you. Knowing these statistics will hopefully put your mind at ease that you’re not alone.

So, even if you’re comfortable in your job and make good money, you may still end up in debt. If you do end up in debt, the lessons we’ll soon learn will ensure that your stay in the financial penalty box is as short as possible.

In our series on debt, we’ll soon learn:

• How in today’s world of social media, “Keeping up with the Joneses” is really more like “Keeping up with the Kardashians.”
• There is a difference between “good debt” and “bad debt.” When used responsibly, good debt can help you reach your financial goals faster.
• Paying off debt is hard. It’s heavy. It’s stressful. There’s no shame in admitting that. Just because it’s hard, doesn’t mean we can ignore it any longer.
• The top strategies to pay off debt as efficiently and painlessly as possible.

Whether you currently have debt or smartly want to be prepared just in case, our series on debt is crucial for anyone seeking financial independence. There is no faster way to undue all your hard work than to fall into debt.

You don’t need me to tell you that debt is a major barrier to reaching financial freedom. In fact, debt is oftentimes the exact opposite of financial freedom.

When you have debt, your choices are limited. It’s like you’re in financial prison. When you are free of debt, you are in control.

Learning about handling debt does not have to be depressing or scary. When we talk it out together, I think you’ll find that you’re not alone. Like with all hard things, there’s no point in struggling by yourself.

Hands in the air. We got this.