I saw an article today which suggested 35% of Americans have debt over 180 days delinquency (i.e. In collections). While it makes for a great headline digging through the report shows it is not great but better than reported. Where it is misleading is it counts total claims in delinquency and divides by the population. It claims 66% delinquency in Detroit. It would make more sense for one person in delinquency to not be able to pay off the car loan, credit card or electricity bill. As shown from the report below,
“Roughly one in 12 (8 percent) Detroit residents have debt that is between 60 and 180 days past due. This past due debt can result from unpaid credit cards, student loans, automobile loans, and other installment loans. Once this debt is more than 180 days past due, it enters collections. Collections debt can also result from unpaid bills such as medical bills, utility bills, parking tickets, and membership fees that are reported to the credit bureau. Two-thirds of Detroit residents (66 percent) have debt in collections, double that of the rest of the MSA. The median amount in collections in Detroit ($1,847) is over $400 more than the median in the rest of the MSA.”
The Atlanta Fed published stats around 6 months ago suggesting 47% of Americans couldn’t raise $400 in emergency cash without selling something. A bank survey conducted recently showed 70% of Americans had less than$1,000 in savings with 34% having zero.
Financial difficulties have not let up since the GFC. While the above article is slightly loose with reality, there is no question the thematic points to a lot of economic hardship. Even if you said 10% of Americans were in debt delinquency it is hardly a number to be proud of.
Overall, household debt in America has now reached $12.3 trillion dollars. When you break that down, it comes to $38,557 for every man, woman and child in the entire nation. This excludes government and corporate debt.
Using data from the U.S. Census Bureau and the Federal Reserve, the average credit card debt for households that carry a balance is $16,048 +10% over the past 3years. At the average variable credit card interest rate of 16.1%, this translates to nearly $2,600 in credit card interest alone. And many credit cards have interest rates much higher than average.
Based on the average interest rate and a minimum payment of 1.5% of the balance, it would take nearly 14 years for the typical indebted household to pay off its existing credit card debt, at a staggering cost of more than $40,200. Keep in mind that this assumes no additional credit card debt is added along the way.
And still people wonder why Trump is as far as he is. He is a by-product of a political class that has failed to deliver.