Since the first credit cards appeared in the 1950s, credit card use has exploded and become a common way to buy goods and services. Just from 1996 to 2005, the number of bank credit cards issued increased almost by half. And in 2005, credit card companies mailed offers in never before seen numbers, averaging 20 offers per person in the United States. The total of those offers equaled $6 billion dollars. Two to three percent of those who received the mailings responded to them.
Credit card companies make billions of dollars a year. Late payment fees used to average about $13 in 1995. In 2006, the average late payment fee was $34. In 2004 alone, they made over $40 billion dollars on overlimit fees, late payment fees and balance transfer fees alone. That total doesn’t count interest rates. There are 4 major card brands in the US. Visa is the largest, then Mastercard, American Express, and the newest card created in 1986, Discover, has the smallest market share. The largest credit card issuer is Bank of America. Citi is the third largest.
People are suffering under credit card debt like never before, with the average family owning an average of 4 credit cards. Fourteen percent of Americans, that’s about 1 in 7, has more than 10 cards. And the average American credit card holder has a total credit limit of almost $20,000. About 39% of Americans with credit cards actually do pay their balance in full each month and avoid interest fees and finance charge. Which means that about 60% of card holders carry a balance from month to month and accrue interest fees.
About 2.5 million Americans get help from a credit counseling service each year because they’re unable to pay their debts and want to avoid bankruptcy. The average person seeking the help of a credit counselor has over $40,000 in total debt, with about $8000 to $10,000 of that being revolving debt, like credit cards. The average help seeker also had at least two credit cards, in addition to their other forms of debt like mortgages, loans and hospital bills. In 2008, the average household carries almost $9000 in credit card debt.
Most people use at least 50% of the debt available to them, a fact which contributes to the average national credit score lowering as most consumers’ debt-to-credit ratio gets higher and higher. If a person has a great deal of credit available and uses little of it, they have a good utilization ratio. But with most consumers utilizing half or more of their available credit, that ratio reflects poorly on their credit scores.
While some consumers seek bankruptcy as a way out of crushing credit card debt, new bankruptcy laws enacted in the past few years make it even more difficult for the average American to successfully file bankruptcy and discharge their debt. There are 640 million valid credit cards in circulation the United States today, representing between $750 and $800 billion dollars in debt.
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