Why Do Americans Have So Much Debt?

Debt is a way of life in America. In 2018, the average U.S. household carried $8,284 in credit card debt alone—an amount that’s on the rise year over year. Then there are other types of debts to consider: mortgages, auto loans, medical bills, auto loans, etc. It’s not unusual for Americans to carry tens or hundreds of thousands of dollars in debt just to pay for the basics of modern life.


This begs the question: Why do Americans have so much debt, exactly?


Debt Is More Than “Overspending” Alone

There are many misconceptions and stereotypes about debt floating around out there. One major assumption is that debt is the result of overspending alone. This frames debt as a voluntary problem; people simply want to buy more, so they do. It points to a lack of self-control, treating debt like a personal failing rather than the system-wide phenomenon it really is.


Sure, people can and do use credit cards to buy nonessentials at times. But it’s simply untrue to assume this is the leading reason debt is so high in America. As CNBC reports, a recent survey found 42 percent of U.S. adults cite “making ends meet” as the main reason they racked up debt on their credit cards. The next most frequent response? Car repairs accounted for 29 percent of debt, while medical bills followed closely with 27 percent of responses.


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This just goes to show that “needs” often outrank “wants” in terms of reasons for taking on debt. Sure, people put vacations, shopping sprees and restaurant tabs on their credit cards. But it’s clearly inaccurate—and unfair to hardworking American consumers trying to stay afloat in our economy—to chalk up debt to overspending alone.


Factors Driving Up Debt for U.S. Consumers

To understand the pervasiveness of debt in America, it helps to look at larger forces influencing consumers rather than individual actions alone.


Andrew Housser, debt relief guru and co-founder of Freedom Financial Network, offers a few contributing reason for high debt levels in this country: To start, people do not always get a fundamental education in managing their finances. Here’s what else he has to say: “Combine that with massive financial service companies actually paying behavioral economists to hone ways to get consumers to take on as much debt as possible, while paying only the required minimum payment, and you have a sure recipe for trapping people in debt.”


Another key factor fueling the cycle of person debt for many Americans is the fact that the cost of living is climbing faster than income is growing. It’s simply more expensive to exist now than it was in the past—but income hasn’t grown in proportion to these rising costs. Housing costs more, whether you’re buying a home or renting an apartment. Getting a college education costs more and has become necessary to secure many entry-level jobs. And paying for healthcare, both routine and emergency, certainly costs more than it did in the past.


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Salaries aren’t keeping up with these skyrocketing costs, meaning people are more often turning to debt to make up the difference. While consumers can and should streamline their spending to try to minimize the amount of debt they have to take on, it’s only fair to acknowledge the role these larger conditions are playing in boosting debt for American consumers.


Why do Americans have so much debt? The answer is deeper than just “overspending.” The best thing people can do is educate themselves on how to manage their finances effectively so they can stretch each dollar they do earn farther. Furthermore, it’s worth looking into ways to eliminate debt before it gets out of hand.




Disclaimer: This content does not necessarily represent the views of IWB.


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