Wednesday, 09 February, 2005

Credit card debt and stupid averages

In an attempt to protect myself against identity theft, I subscribe to a service that alerts me whenever there's activity on my credit report. If somebody checks my credit or if a new credit account is opened in my name, I learn about it within a week. The weekly status update email (which usually says "no credit alerts have been triggered by changes to your credit report") always includes a credit tip from the editor. This week's tip says:

The average American carries $8,562 in credit card debt. All this debt leads to 1.3 million consumer bankruptcies in the US each year.

Blink. ... Blink.

I'm skeptical about any statement that starts with "the average American," so I went looking for some real numbers.  (As an aside, you get lots of hits on "credit counseling" sites scams when you search for "credit card debt statistics".)

According to the most recent Federal Reserve G.19 release, total consumer debt is about 2.1 trillion dollars.  Of that, about $800 billion is "revolving" debt.  The $2.1 trillion includes auto loans and other "non-revolving" debt, but doesn't include mortgage loans (an additional $4.5 or $5 trillion).  Yes, total personal debt of about $7 trillion exceeds the accumulated national debt of about $5.7 trillion.

The thing that I really hate about these "average" statements is that they don't tell me how whoever reported it arrived at the number.  Do I divide the total revolving debt by the total number of people in the country?  By the total number of adults?  Just the green left-handed vegetarians?  No, in this case it turns that "the average American" is really a person who carrys a balance on his credit card, or about 93 million people.  I guess it could be the total number of credit card holders, although that would mean that less than 50% of adults in this country have credit cards.  Figuring that the number was reasonable, I gave up trying to find out exactly how it was calculated.  But I'm still curious.

People, please, would you stop with the unqualified "average" statistics?  Those numbers are worse than useless.  Tell me how they're calculated.  Better yet, point me to the raw data so that I can play with the numbers myself and draw my own conclusions.