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Average Consumer Owed $4,200 On Credit Cards at Year End

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The average consumer owed more than $4,200 on their bank credit card(s) as of the end of 2010, according to a new press release from credit reporting agency Experian.

Americans were able to reduce their December credit card debt by more than four percent since 2009, but the company also revealed that the average number of bank cards held by consumers dropped 23 percent since 2007 to 1.97 cards.

And because consumers are holding similar amounts of debt on fewer bank cards and credit cards, their credit scores will likely suffer.

This has to do with the fact that credit utilization is a huge component of Experian’s VantageScore scoring algorithm.


In fact, 23 percent of a consumer’s VantageScore credit score has to do with credit utilization, which is the amount of debt outstanding divided by the consumer’s aggregate credit line.

For example:

- $4,200 outstanding debt
- $15,000 aggregate credit line
- Credit utilization: 28%

In this scenario, credit utilization is low. But if the above consumer only had a $5,000 aggregate credit line, they’d be using 84% of available credit, and would surely see their credit score suffer as a result.

What’s clear is that Americans aren’t doing a great job of getting out of debt, despite moves by credit card issuers to reduce credit limits and close card accounts.

Fortunately, credit card issuers have gotten their risk appetites back, and are touting more aggressive balance transfer offers, such as 0% APR for up to 24 months.

This means no finance charges for two years, a great way to reduce debt without getting into more of it, a trap that plagues many Americans.

(photo: thetruthabout, CC)

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