There’s currently $.78 trillion in credit card debt in the US, which leads me to ask: what interest payments are going to the large banks who finance this debt? Furthermore, if everyone in the US divested from their debt owed on corporate credit cards, where could that money go?
As an thought experiment: my email list has about 700 people on it, so if we use averages I’ll explain below, that means 280 of us have a revolving credit card debt balance and we pay $28,000/month in interest on our debt.
Out of the 700 of us, we could make that up with a collective $40/mo each in donations. Or, the 60% of us without credit card debt could match the interest our indebted friends are paying and throw down $67/mo each.
The amount of money going to consumer debt in the US is bananas and it’s worth understanding. I also want to share a few places I’m donating that you might consider if this moves you, but first — what’s is even going on with credit card debt in the US right now?!
THERE’S A DEBT CRISIS, BUT FOR WHO?
Debt either seems like a crisis to you, or it doesn’t. It depends on your friend group. It depends on your ethnicity. It depends on your race. It depends on the class into which you were born. Much like 25% of college graduates have no debt, 60% of the u.s. population has no revolving consumer debt. But for some people, you’d never know that there was anyone without debt.
The NY Federal Reserve just announced that for the third straight quarter, credit card debt has gone up and is approaching levels seen around the Great Recession of 2008 (cite).
Consumer Debt is any debt that is not a student loan or a mortgage. It’s debt that relates to purchases of consumer items: cars, clothes, anything you can put on a credit card.
There are two main reasons people accrue this debt:
- people accrue Consumer Debt when in crisis and when they have no other resources on hand with which to pay for crucial items.
- People also get into Consumer Debt when participating in consumer culture and purchasing items that may not be crucial, but rather are optional, but cost more than their income can cover.
For the 39% of people who have credit card debt, the average credit card debt is $3,600, and the average household credit card debt is $6,885, (as of May 2016, which is up from $5,700 in 2013). But, it breaks out in a way that may not surprise you: for those debtholders who have negative net worth — e.g. don’t own a house or other assets — the average debt is $10,307 — more, on average, than those people who have net worths of $500,000 or more.
DEBT: THE NUMBERS
No matter how the 2 in 5 Americans who have this debt entered into it, if you’re one of these folks you have you likely carry a balance on your credit card. In many cases this balance is accruing interest and part of the payment you make to your credit card or auto loan or Store card company each month is interest which is money being paid to this large organization in exchange for the benefit of borrowing some money from them.
As of May 2017 there’s $2,291,400,000 owed on all our consumer debt – and what was $.76 billion on our credit cards in May is up to $.78 Billion as of the end of June 2017. For the 206,189,000 working-age adults in the US (15-65), that’s $11.13 a person. For every person.
Nationally, the volume of interest that is paid monthly to large banks, lending institutions, and corporate stores who have merely extended credit to people to purchase their items is VAST. Says Nerdwallet, “The average household with revolving credit card debt … pays $1,292 a year in interest.”
That’s $1292 annually that 40% of the US isn’t putting towards their student loans, kids, health care, vacations, or wellness — it’s only going to banks. Soak that in. It’s $108/month on average. That’s car insurance, or your kids’ after-school lessons, or a family gym membership, or an upgrade to organic food.
Let’s break out the numbers:
$2,291,400,000 consumer debt owed x 15% APR = $28,642,500.00 in interest EACH MONTH charged to US consumer debt holders.
$780,000,000 credit card debt x 15% APR = $9,750,000.00 in interest EACH MONTH charged to US credit card debt holders.
There is a lot of profit — even considering that 5-10% might get charged off in bankruptcy — in loaning money and then collecting interest on repayments. More: that is a LOT of money that people have to go out and earn.
I know how long it takes me to earn $108 after taxes to cover that payment — you?
No wonder this is big business.
Large banks make money based on the premise that you won’t pay them off in full each month, and they can begin to charge you interest. Corporate stores are making money in two ways: both by having their item be purchased, and by earning interest on the money loaned to purchase the item.
Now those on-sale gizmos don’t cost $39.99 – they’re $39.99 + 15% interest for however long it takes to pay them off. Ooof #thathurts.
There are times when paying interest is strategic and is a way of leveraging resources or gaining an asset, like financing professional education, accessing work, or gaining equity in a property — but I’m not talking about those times. Growing consumer debt is often a sign that something in your finances is not working: perhaps you’re not paid enough, perhaps you’re spending over your means, perhaps you’re not giving your spend enough attention.
THE RUB FOR THE PEOPLE
Meanwhile, grassroots organizations struggle to get funding and individuals struggle to feel they can share resources. INCITE!, the authors of The Revolution Will Not Be Funded, detail how funding struggles come from orgs not being able to access grants or foundation funding, or finding their work doesn’t fit funders’ models or priorities.
Individual campaigns find they’re asking an already-stretched population to chip in and help. A segment of the money of everyday people is being suctioned off by usurious lenders via our bad spending habits or crisis needs. It’s going to pay for necessities like healthcare, increasingly to fund education, or to consumer shit that reinforces globalization’s worst qualities. A segment of the money of people with wealth is only going to tax-managed donations to 501c3’s, rather than to the many small orgs who can’t provide a tax receipt.
I don’t think there’s “not enough money to fund change.” There is a LOT of money, especially now. I think that being strategic can change what’s happening.
What if the revolution could be funded – and we just have to stop giving money to debt to do it?
What organizing would the $9,750,000.00 being paid each month on credit card interest fund instead?
- 100 grassroots orgs getting $97,500 a month. That’s an office and 10 well paid employees and money to run campaigns.
- 1,000 grassroots orgs getting $9,750 a month. That’s an office and 2 well-at-least-we’re paid employees and an intern stipend.
- 10,000 grassroots orgs getting $975 a month. That is meeting space, food and transit paid for attendees and honorariums for organizers/presenters.
In my dream world, for one month, everyone who wasn’t paying credit card interest chipped in and donated money equivalent to the interest paid on consumer debt to one really crucial cause, say Black Lives Matter or the Black Youth Project 100 or Southerners on New Ground or to your favorite arts and culture project. Your local faith-based initiative, radical mental health support, or community center all need resources. It’s never hard to find a worthy place to put resources: it’s about getting and then delegating the money where we seem to get stuck.
THE HACKS GROUPS COULD DO
Leaving aside the complexity of other responsibilities many of us juggle (student loans, health needs), just take a moment to wrap your head around what is *possible* if we chose to hack debt, that is: if we got systematically strategic using our understanding of how it works.
- To recap from above: we could collectively make up the money going to credit cards with an average of $40/mo each in donations.
- Or, the 60% of us without credit card debt could match the interest our indebted friends are paying and throw down $67/mo each to cover them as they dig out.
- Or, those of us with access to more resources could buy bundles of debt in collections (usually for pennies on the dollar) and straight up forgive the debts.
THINGS YOU CAN DO
1 ) Strategically pay more than minimums on your personal debt. This works out to paying less interest in the long term, and allows you to start to climb out of debt. Try this debt calculator to create your personal payment plan, or declare bankruptcy and get out quick and dirty, or heck get into a motivational hacking debt class. If you have debt: you’re allowed to make a plan for yourself to get to the end of it. #killdebt
2) Seriously, don’t buy extra stuff on credit if you really don’t have to. It’s way more satisfying to allocate your money or save up and throw down the cash for a fun thing guilt-free. That’s how I bought my motorcycle, anyway 🙂 **check out this video course that teaches you exactly how, and get a BONUS: no banks profit when you get your stuff.
3) Donate to grassroots movements! I’ve upped my monthly donation spend to 3% of my income (cuz I just paid off my student loansssssssss yessssss!!) and I’m throwing down for Black liberation with the upsurge, having added the BYP100 and Third Wave Fund to the list of orgs I give monthly to. It’s literally the least I can do and I am doing it.
4) Vision the world with other economic models. This might be a big ask, but I’ll ask it anyway. What would the world be like if we still had jubilee, the jewish practice of forgiving all debt every 50 years? What would the world be like if debt was a form of interconnection instead of exploitation? What’s in front of us with the advent of cryptocurrency? How can you disconnect from fear and leverage your resources strategically?