One Third of Wealthy Have Credit Card Balances

As the holiday spending rush continues, congenial talking heads warn about increasing credit card debt during this festive time of the year.  They warn of the doldrums faced by consumers come January.  Yet despite the doomsday warnings, consumers are apparently ignoring their words and spending, although somewhat more precipitously than in the past.

The National Retail Federation revised its holiday forecast from a 2.8 percent growth rate to a 3.8 percent growth rate over the 2010 holiday season.  Yet while the 3.8 percent increase is above the 10 year average sales increase of 2.6 percent, it is below the 5.2 percent increase seen in 2010.  A recent survey also suggested that the purchases in November may have been for the individual rather than as a holiday gift.  Why not replace your worn out TV with the great prices being offered during Black Friday sales?  The challenge is that if households are buying necessary items for themselves during the holidays, will they fail to purchase items the other ten months of the year?

While individuals continue to cautiously spend, it is clear that not all households are debt free.  Even those households that are moderately wealthy have significant debt.  For example, in a recent survey of households with $100,000 to $500,000 of net worth, Millionaire Corner found that 35 percent had credit card balances with the average amount being about $14,000.

Affluent households have other types of debt as well.  More than half have a first mortgage on their home with the average amount of the mortgage being $167,000.  About 20 percent have a second mortgage or home equity loan.  Almost one third have a car loan, averaging 17,000.  About 9 percent have other types of loans.

As far as managing credit card debt is concerned?  While wealthier households may seem to be in a better financial situation, it is often said that you "spend what you make".  Regardless of one's level of wealth, it is important for holiday shoppers to keep track of what they are spending and not to give in to last minute feelings of graciousness. 

As you deal with your last minute shopping, try not to pay more for shipping than for the present itself....but in the end, remember that even wealthy households have some credit card debt.  Just make sure you can manage it.