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Stupid human tricks
If you're looking for a fall guy for the state of America's finances, better take a gander in the mirror. At the end of last year, U.S. households had $10.4 trillion in outstanding debt, and one out of every 73 filed for bankruptcy. The Commerce Department reports that our personal savings rate is a wafer-thin 1.8%. As a nation, we're borrowing money at a record clip to pay for a lifestyle well beyond our means.
I don't care what the Joneses have parked in their garage. Evidently, a lot of other people do. On average, we carry eight credit cards per person and have a balance of $8,400 in credit card debt. Twenty percent of our cards are maxed out, reports CardWeb.com, which tracks the lending industry's machinations. And just 40% of Americans pay off their accounts in full at the end of the month. The average line of credit is around $3,500. (A decade ago, it was just $1,800.) The average household pays its lender $1,000 a year in finance charges.
It's not just that we're borrowing more money and paying it back more slowly; it's that we're spending money we used to consider off-limits. Home equity loans are more popular than ever as people borrow against their home to feed their spending binge. Today, average homeowners owe nearly 50% of their home's value. Twenty years ago, that figure stood at 30%.