Axios article The credit card industry has been struggling with its own debt crisis for years, as companies have been trying to find ways to cut costs and boost profitability while also maintaining their customers’ faith in them.
A new report from Credit Karma shows that the credit card sector may be heading into an even more dire state than it has been in recent years.
While some of the debtors facing these dire financial straits may be just starting out in the credit-card game, a larger group of credit card holders is still struggling.
The average credit-debt debt of a person with credit-related debt was $1,926 in 2015, according to Credit Karma.
That’s a huge increase from the $1.15 trillion in outstanding debt that credit-holders have taken on in the past 15 years.
Credit Karma found that the average credit card holder owed about $1 million in debt in 2015.
While credit card companies may be making a concerted effort to cut their debt, they’re still not making the best use of their debt to cut down on interest rates.
According to CreditKarma, the average interest rate on a credit card was 0.3 percent in 2015 — far below the 0.7 percent average interest rates charged by the credit industry’s largest credit card issuer, Visa.
In other words, the credit cards average interest cost per dollar of credit was far lower than that of the industry’s leading credit card issuers.
For example, in 2015 credit card customers with credit cards in the high-end segment paid nearly 1.8 percent of their credit card balances in interest.
Credit-card customers in the mid- and low-end segments paid about 0.6 percent and 0.4 percent, respectively.
The highest-cost credit cards, meanwhile, had average interest costs of 1.3 and 1.2 percent, which were far below those of their lowest-cost counterparts.
Credit Karma found the average annual interest rate charged on a $100,000 credit card account was just 1.6.
It was the lowest rate among the credit categories it examined.
While that’s lower than the average rate of 0.5 percent charged by Visa and MasterCard, it’s still significantly higher than the industry average of just 0.1 percent.
As the number of credit-cards has skyrocketed over the past few years, so has the average payment on a typical credit card.
For 2015, credit- card payments averaged $9,064, up from $8,742 in 2014, according the report.
Credit Cards and the DebtAxios credit-sales team is a member of the American Bankers Association (ABA) and the Credit Karma Insights team.
Learn more about the CreditKama Insights program.