The more you make, the more you spend says Engel’s Law of Economics. Here it is in play as Friday’s read talks about higher income people and their higher debt.
- The average credit card debt for households with zero or negative net worth is $10,307 – not surprising since if you have a negative net worth, you need credit just to get by. On the other end of the economic spectrum, households with net worth above $500,000 carry the second-highest average credit card debt at $8,139.
- Why would high-net-worth households carry so much credit card debt? Perhaps for one simple reason – because they can. Wealthier households are more likely to make more purchases and to pay off balances whenever they choose to do so.They may run purchases through their credit cards to get rewards or other perks even when they could afford to pay cash.
- In all categories with positive net worth, households carrying balances appear to be keeping those balances within limits. Generally, the average credit card debt scales upward with net worth (given the exception of those with no positive net worth at all). Households with net worth between $1 and $4,999 carry an average $3,946 of credit card debt, and the averages tend to increase proportionately with household net worth.
Numbers scale up. At $250,000, average debt is $7,481 and $500,000 is $8,139.
As my old Irish grandmother would say, it is not what you earn. It is what you save.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group