How Much Is Too Much Credit Card Debt? How Do I Compare?

 

Countless folks are asking the question: how much is too much credit cad debt? And to that I say there are countless answers. The one that applies to you depends on your financial situation. Let’s take a look at a couple of answers to the question and you can maybe see where you are.

Can You Pay The Entire Thing?

The simplest and possibly best answer is if you can’t pay your entire balance off at the end of each month, you have too much credit card debt. If you can’t pay off the entire thing, you can’t afford to make the purchases you do. This answer though kind of defeats the purpose of credit cards, the availability of extra cash when you need it for unexpected things such as car repairs or airline tickets. Cases when you may want to spread payments out over a few months.

What Is Your Debt To Income Ratio?

Another answer to look at is your debt to income ratio. The total of your monthly payments for things such as mortgage, car payments and credit card payments divided by your gross monthly income equals your debt to income ratio. Don’t include groceries or energy payments when calculating this ratio. You want to maintain a percentage less than 36 according to most experts. If yours is creeping up, and all other monthly obligations are remaining constant, the obvious conclusion is that your credit card bills are too high.

Can You Pay More Than The Minimums?

Finally, if you are finding yourself strapped each month, and unable to pay more than the monthly minimums on your credit cards, you probably have too much credit card debt, and probably should be looking into programs such as debt settlement or debt counseling.

So how much is too much credit card debt? Look at your total balances. Are you feeling anxious about them? Is your debt to income ratio above 36 percent? Can you pay off the totals at the end of the month? If you answered yes to any of these, you may need to take a good look at your credit card situation.