If you carry a balance on your credit cards, you might assume that the amount of your debt is in line with the average credit card debt in America. After all, millions have thousands of dollars in debt and if everyone's doing it, then it must be okay - right? That line of thinking can be deadly to your financial future. Here are some things to keep in mind when analyzing your credit card debt...
1. What Do You Think is Average?
If you think that your credit card debt is in line with the average credit card debt in America, you probably have some preconceived notions of what "average" really means. If you've been following statistics, don't kid yourself -- statistics can be misleading.
If you're quoting that the average American's credit card debt is about $9,000 you're wrong. Technically, that's what the statistics say, but that's not the real picture. The average person owes less than $3,000 in credit card debt according to MSN's Money Central.
The $9,000 that people quote is a statistic that was obtained by dividing the total credit card debt in the United States by the number of credit card holders. Let's say (for simplicity's sake) that there are 5 credit card users in the country. Four of them have credit card debts of $2,000 each. The fifth has a credit card debt of $50,000.
If you use the "statistic method" that's behind the $9,000 figure that so many people go by, the average credit card debt is more than $11,000 according to the model, although almost every single credit card holder has a debt of just $2,000. Starting to see the picture?
2. What's Good For Mr. Goose Isn't Necessarily Good For Mr. Gander
Let's call you Mr. (or Ms.) Gander for a moment. You have $10,000 in credit card debt, but that's okay because your friend Mr. Goose has $10,000 in credit debt too. Time for a quick reality check...
Just because Mr. Goose has $10,000 in credit card debt doesn't mean it's okay for you to have that much debt too. You are not Mr. Goose. You are Mr. Gander. And regardless of what you think, just because it's okay for Mr. Goose to have $10,000 in credit card debt doesn't mean it's okay for Mr. Gander too.
Mr. Goose may very well be overextended or his income might be two or three times yours. Either way your situations are not identical and you can't compare his credit card situation to yours.
So before you assume that your credit card debt is in line, ask yourself why you really think that. Are your finances really under control, or have you been comparing your debt to the debt of others, assuming that you're fine if you're going along with the flow?
Remember, just because you think that your debt reflects the "average credit card debt" in America, it doesn't mean you have a healthy credit situation.
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