Consumer Debt: Definition And Average Balances In The U.S.

Consumer debt rose in the first quarter of 2023 to hit $17.05 trillion, as reported by the Federal Reserve Bank Of New York. While balances rose on mortgages and auto loans, credit card balances stayed relatively level.

It’s often difficult to put these numbers into perspective. But based on 2022 data from Experian, this means consumers each carried an average of over $100,000 in debt. And the trend continues to see consumer debt climb higher every year.

What Is Consumer Debt?

Consumer debt is personal debt that individuals take on to pay for goods or services for their household. But under this overarching umbrella, consumers can take on many different types of debt.

A few specific examples include home loans, credit cards and auto loans. At a high level, consumer debt generally falls into the categories outlined below.

Secured Vs. Unsecured Debt

Secured debt involves putting down collateral for the loan. If the borrower falls behind on their payments, the lender may have the right to seize the collateral asset. For example, mortgage loans and auto loans are a type of secured debt. In both cases, the borrower risks losing the underlying asset – a home or a car -- if they miss payments.

Unsecured debt is another type of loan that doesn’t involve collateral. These loans, like unsecured personal loans and credit cards, do not require anything to secure the loan. Unsecured loans tend to have higher interest rates than secured loans because they are seen as more risky to the lender.

Revolving Vs. Non-Revolving Debts

Non-revolving debt involves a lump sum loan amount that you repay over time. After your loan amount is disbursed, you won’t have the option to tap into more funding. Student loans, mortgage loans, and auto loans are all types of non-revolving debt.

In contrast, revolving debt is more flexible. Instead of receiving a lump sum loan amount, revolving debt gives borrowers access to a credit limit. As the borrower, you can spend up to the credit limit. As you repay the borrowed funds, your available credit will increase again up to your limit.

Credit cards are a common type of revolving debt.

Consumer Debt Balances In The US 

Consumer debt balances have been on an upward trend in recent years. As a continuation of this trend, total consumer debt in the U.S. hit $17 trillion for the first time in 2023.

Below you’ll find tables offering a closer look at the size of consumer debt categories in the U.S.

Total Consumer Debt Balances In The US

Mortgage loans represent the largest category of consumer debt in the U.S. But other types of debt account for trillions of dollars in household debt.

Average Household Consumer Debt Balances In The US

With numbers in the trillions, total consumer debt balances are often difficult to reckon with. Below you’ll find a breakdown of average household balances across different loan types, which offers a clearer insight into how much debt households carry.

Factors That Contribute To Rising Consumer Debt 

Consumer debt is growing. Let’s explore some of the reasons behind this trend.

Household Spending

Household spending rose sharply in 2021, which is the last year this data is available. Of course, inflation has pushed many households to spend more on the basics. But some households are also choosing to spend more on entertainment.

As household spending rises, some turn to consumer debt to make ends meet.

Interest Rates

Interest rates have risen sharply in the last year. As interest rates rise, consumers are dealing with higher interest payments on their financed purchases.

With the average credit card interest rate above 20%, it’s not hard to see how consumers might have trouble keeping up with the interest payments.

Inflation

Inflation is continuing to put pressure on household spending. As the cost of goods and services rise, households are forced to spend more or cut back. When cutting back isn’t an option, spending more on the basics can push many households into debt.

5 Tips To Reduce Your Personal Debt

If you want to lower or pay off debt, take a look at these helpful tips.

1. Create A Realistic Budget

When it comes to hitting your financial goals, creating a realistic budget is essential. Within the budget you create, try to prioritize debt payments.

Be realistic when setting limits for your spending categories. And once you have your budget outlined, look for places where you can reallocate funds to put towards debt payments.

2. Negotiate Your Monthly Bills

Negotiating your monthly bills can give you the breathing room you need to tackle debt. Every dollar you save from your standard bills can go toward paying off your debt early.

Luckily, it’s easy to negotiate your bills with the help of Rocket Money^SM. The app offers a bill negotiation feature to help you save money each and every month. Rocket Money will scan your recurring payments and search for opportunities to find better rates and prices for common services like cell phone service and cable. If you engage this feature, a negotiator from Rocket Money will work with the billing company in question to get you the best possible rate.

3. Use The Debt Snowball Method

The debt snowball method involves tackling your debt with the smallest balance first. After you pay off this first debt, you’ll incorporate the eliminated monthly payment into your ‘debt snowball’ to use on your next smallest balance. Along the way, your snowball will grow to tackle your bigger debts.

If you are motivated by wins along the way, the debt snowball method is a great fit.

4. Use The Debt Avalanche Method

The debt avalanche method is similar to the snowball method. But instead of tackling the smallest balance first, you’ll work on the debt with the highest interest rate first. As you eliminate debts, your savings will gain momentum and mass to sweep away other debts with lower interest rates.

If you are motivated by mathematical efficiency, this option can help you get debt free faster.

5. Avoid Taking On More Debt

As you pay off debt, do your best to avoid taking on any more debt. The best way to do this is by building an emergency fund to cover unexpected expenses.

If you are able, take your previous debt payments and funnel those into an emergency fund.

Consumer Debt FAQs

You have questions about consumer debt. We have answers.

Is a mortgage considered consumer debt?

Yes. A mortgage is considered a type of consumer debt.

Are consumer debt balances increasing in the US?

Yes. Based on the latest data, consumer debt balances increased in the last year in the U.S.

What type of debt has the highest consumer debt balance in the US?

As of 2022, mortgage debt is the largest consumer debt category. Behind mortgage loans, student loans and auto loans are some of the largest debt categories.

What state has the highest average consumer credit card debt?

As of 2022, Experian reported that consumers in Alaska carry the highest average credit card balance. The average credit card balance in the state was $7,338.

What is the average American household debt in the US?

As of 2022, the average American household debt was $101,915. For the last several years, this average balance has trended upward.

The Bottom Line

Consumer debt is a constant burden for many households. But you can stay on top of and lower your consumer debt by taking a proactive approach to debt management. The Rocket Money mobile app offers an efficient way to manage your debt by helping you track spending, budget money, negotiate bills, and more in an effort to pay off debt.

Want to put Rocket Money to work for you? Create a Rocket Money account and download the app today.