Carrying too high of a credit card balance is problematic for a couple of reasons. First, the higher your balance is, the more money you stand to lose to interest. Having too high a balance can also result in a higher credit utilization ratio, which could, in turn, bring down your credit score. That's why it's important to aim for a manageable amount of credit card debt -- or, ideally, no unpaid balance at all.
But if you do have a pile of credit card debt, you're far from alone. The average credit card balance in the U.S. is $6,194, according to recent research by The Ascent. Still, that average credit card balance doesn't tell the whole story.
While $6,194 may be the average credit card debt in the U.S., the majority of people owe less than that amount. A good 52.1% of Americans owe $2,500 or less on their credit cards, and 15.5% owe between $2,500 and $5,000. Only 17.9% of Americans owe $10,000 or more on credit cards. But thanks to some larger balances, the average credit card balance works out to $6,194.
Now that you know what the average credit card balance looks like, the question is: How do you compare? And does it really matter?
The answer to that second question should really be no.
Even if you're only carrying a $5,000 credit card balance, that's still $5,000 you're racking up interest charges against day after day (and the higher your interest rate, the worse the damage). And it's $5,000 that is weighing down your credit score. As such, it almost doesn't matter if you compare your balance to the average credit card balance; what you should instead focus your energy on is paying off the debt you've accrued.
How do you do that? First, cut back on spending to free up some money for debt payoff purposes. You can also try getting a second job to give yourself more money to work with. Or, try a combination of both.
From there, take a look at your credit card debt and see how it's spread out. Are you carrying a balance on multiple cards or on a single card? If you're dealing with one card only, your next step is simple: Work on chipping away at that card until your outstanding balance is paid off. If you're carrying a balance on more than one card, start by paying off the one with the highest interest rate, and work your way downward from there.
You can also try moving your different balances onto a single card via a balance transfer -- ideally, a balance transfer card with a 0% introductory APR -- and paying that one card off as your financial situation allows. Or look into other forms of debt consolidation to see if you can reduce the interest you're paying and make life easier with just one monthly payment.
The sooner you get rid of your credit card debt, the more financially healthy you'll be. It may be a comfort to know that you owe less than the average credit card balance. But your ultimate goal should be to shake that debt entirely -- and stop throwing away money on interest when you could put it to much better use.
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