People who live in glass houses, shouldn't throw stones. Not only do most Americans criticize the government for escalating the federal deficit, but according to the most recent polls, they are in favor of increasing the ceiling. Most people understand how catastrophic it would be if the government didn't raise the ceiling.

Although it would be an unprecedented evernt, chances are interest rates would soar at the very least. Just by the mere fact Congress and the President can't agree on what to do, governments all over the world that buy our debt (which finances the deficit,) are getting rather skeptical about how the US Government is run. This may prevent them from buying in the future.

Average Credit Card Debt Is Down

But, let's take a step back and examine the situation. According to TransUnion, one of the three credit bureaus, the average credit card debt decreased 5.8% from $4,965 to $4,679 from the last quarter of 2010 to the first quarter of 2011. This is the lowest the average has been since the third quarter of 2000 and substantially lower than the peak, when the average was a whopping $5,776.

Some of this could be due to charge-offs, where the creditor realizes the loss and writes it off.

While household debt doubled from 2000 to 2007, government debt grew at a more modest pace, from $6 trillion to $9 trillion during that same period. Since 2007 government debt has spiraled out of control.

Household Debt As A Ratio To Household Income

Yet despite the fact many people have been paying down their credit card debts, according to the Federal Reserve 2010 US household debt is a whopping 107% of household income as total household debt weighed in at $13.4 trillion compared to total household income of $12.5 trillion.

This compares to the ratio of the government's debt to Gross Domestic Product (GDP). This ratio was a mere 94%, as the government's debt at the end of 2010 was $13.8 trillion (not too far from total household debt) and GDP was $14.7 trillion. 

Perhaps we need to get our houses in order before we ask the government to do the same. 

Using Debt For Needs

Melodee Sheils, director of Consumer Credit Counseling Service of the Miami Valley reports that people are still spending, but instead of using their credit cards to purchase things on a whim, they're using their credit cards simply to survive and are using them on necessitites.

Have you paid down your credit card debt lately?

CategoriesCredit & Debt