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Utilization, revolving credit and credit card debt

According to an infographic from Supermoney that draws on a report from the credit agency Experian, the average credit card debt of people in Texas falls somewhere in the middle of the national average. People in Iowa carry the lowest balances with an average of $5,155. Alaskans have the highest at $8,515. In Texas, the average is $6,902.

When it comes to credit card balances, there are two elements to keep in mind when assessing financial health. One is revolving credit and the other is utilization. A high monthly credit card bill does not necessarily mean a person is struggling with debt because many people use their credit cards in order to get reward points and then pay them off monthly. When people do keep balances on their credit cards, they are known as revolvers, and the interest charges on these balances can add up. Nationwide, this revolving debt is more than $1 trillion, and the interest charges for the average household costs about $1,000 monthly.

Utilization refers to the amount of available credit that is used. Even if people pay off a debt each month, if they are using more than 30 percent of their available credit, this could hurt their credit score. Getting additional credit cards may temporarily lower a credit score but can raise it overall if the cards are used responsibly.

Unfortunately, for some people, credit card balances can become unmanageable. Bankruptcy may be one alternative for debt relief. While some people might think they will lose all assets if they file for bankruptcy, if they are eligible for a Chapter 13 bankruptcy, they may be able to keep some assets such as a home. Filing for bankruptcy would stop immediate actions, such as foreclosure and collection activities.

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