How Much Credit Card Debt Is Too Much?

What credit card debt is too high?

We all get into various situations that we might not expect. Often times, this means that we might have to look to resources that we didn’t expect to use in order to deal with these situations. This might mean household expenses that have to be taken care of, a medical emergency, or expenses for your children that have to be dealt with, and cannot wait. We all know that credit cards are everywhere, and the truth is that credit card debt is immense – only trumped by student loan debt, which many consider to be a huge problem for The United States in general.

How did we get here? Well, the truth is that credit card companies are so successful for a reason, and the terms to which they are issued allows for massive profit. For those who might be unaware, the average American has credit card debt of over $6000. Some might believe that there is a psychological factor to credit cards, where individuals might feel as though it is more convenient to deal with bills later than upfront. However, there are many that might agree that there is a point where the credit card debt is too much. Whether you are using credit cards for personal needs, or for your business – there is definitely a point where it can become crippling.

Debt-To-Income Ratio

Everyone is in a different economic situation, which is why we often have to look at an individual’s debt-to-income ratio. It’s understandable to see how this works. If you are not making much money in your current job or situation, how will you be able to pay off the credit cards? Similarly, if you have a massive amount of credit card debt, but you have a significant income – credit card debt isn’t as big of an issue as one might believe. It is obviously important to see how the debt-to-income ratio plays a massive role in credit card debt.

For example, if you have $1,000 in credit card debt, but you only make $10,000 a year – that means that the debt to income ratio is 10%. It’s important to note that this is a high ratio. If someone is making $10,000 a year, this only amounts to making $833 a month. While this might work for a high-schooler or a college student with all expenses paid (room and board/food) – it certainly would be difficult for someone to live on this income. We all know that after rent and food, $833 can be gone very quickly. How can one expect to pay down this debt with this ratio?

There is another situation where 10% might be more manageable. Let’s say that you have $100,000 in credit card debt, but that you make $1 million a year. if you are bringing in $1 million a year, this now means that you make over $83,000 a month. Of course, the next question is: how are you living? If you happen to be making $1 million a year and live a very frugal life, this means that your credit card debt can be paid very quickly. Similarly, if you have zero expenses, and your credit card debt is $1000 on a $10,000 income, and the next $833 from your income can go directly towards your credit card debt – the situation is now much better.

We all have to take into consideration the debt-to-income ratio. If you have a massive amount of bills and expenses, and your income goes towards THOSE bills, and not towards paying down your credit card debt – it might end up becoming more of an issue. Always consider your debt-to-income ratio when it comes to your credit card debt.


There is definitely another way to consider credit card debt, as well. You might think about the length of time it will take for you to pay down the credit card debt. After all, isn’t that what you should be concerned about? There are certain people that might think of debt as a foreign concept, but for most adults – we recognize that we have certain obligations, and that they have to be paid. Our focus should then be about how much time it will take to pay off these debts.

One way to understand whether credit card debt is too much is very simple: can you pay it off in one year? This might help you tremendously in understanding your spending habits. If you are constantly spending on your credit card for your own entertainment – are you thinking about your debt in a long-term way? It might not be sustainable to go out to a nice restaurant every week if you know that your income cannot support that lifestyle.

Let’s look at it like this – if you make $60,000 a year, this means that you have an income of $5,000 a month. This is a substantial income, but we all know that a $5,000 monthly income is much different in a very trendy neighborhood than in a rural area, where your dollar might be able to stretch much further. For example, there are many in New York City that might pay $3000 in rent. After their daily expenses, groceries, entertainment, and bills – that additional $2000 might be stretched very thin. It is easy to understand why it might be very tough to pay down a credit card bill, especially when one takes into consideration the occasional emergency.

If that particular individual living in NYC making $60,000 a year has $10,000 in credit card debt – it seems very clear that it will be difficult for that debt to be paid down, and it might be time to describe that debt as “too much credit card debt”. While there are measures that can be taken – for example, they might move in with their parents and save money to pay down the credit card debt – if his/her lifestyle doesn’t change, how will $10,000 be paid in a year? It would mean that almost $1000 would have to be paid every month towards the credit card debt, and it doesn’t seem very probable given their income and expenses. This is an easy way to think about credit card debt in a timeline. Can you pay it off in a year? If not, it might be too much credit card debt.

Credit Score / Other Obligations

There’s one obvious metric that can help you determine whether you have too much credit card debt. If your credit score is terrible – this obviously means that you cannot keep up with certain payments, and that it is too much for the way that you live. Your credit score depends on the amount of debt that you have, the open accounts that you have, and how you have accrued the debt, as well. Everyone understands that credit score can be very helpful when it comes to milestones such as auto loans and mortgages. If you are being forced to jeopardize your score because of your credit score – this is a huge red flag.

Another way to determine whether you have too much credit card debt is if you own a home. We all know that for many people, their mortgage is their biggest expense. We know that owning a home is the goal for many people, and what many consider to be the “American Dream”, or even the dream of financial security in a global sense. If your credit card debt has ballooned to the fact where your credit card debt is bigger than your mortgage, that means that it is clearly a huge obligation on your life that is dragging down on you. That’s why one should never make sure that their credit card debt, and their payments – is more than their mortgage.

It’s easy to see how other obligations can make it clear that your credit card debt is simply too much. Whether you have a family or not, one should certainly have some emergency money. This can come in handy for a medical emergency, or for other personal emergencies, as well. If you cannot have $1000 in an emergency fund because of your credit card debt; it is time to come to terms with the fact that your credit card debt is simply excessive. At this point, you have to recognize that your credit card debt is too much.

There are many other signs that your debt is excessive. You might notice that you are getting constant calls from collection agencies. You might be turning to payday loans in order to make sure that your bills are paid. You might even be turned down for other loans thanks to your credit score. At this point, you have to understand that your credit card debt is simply too much, and it needs to be addressed.

There are many ways to figure out whether your credit card debt is too much, and these are some telltale signs that the issue might need to be addressed. Of course, with the right adjustments and actions, an individual can figure out how to pay down their credit card debt over time.

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