Around 23% of Americans are debt free, according to the most recent data available from the Federal Reserve. That figure factors in every type of debt, from credit card balances and student loans to mortgages, car loans and more.
The exact definition of debt free can vary, though, depending on whom you ask. For example, some people don’t count mortgages because they are viewed as “good debt” by creditors, since they are secured by the property itself. It may be helpful to look at the percentage of people who hold different types of debt in order to get the full picture.
| Type of Debt | Americans With This Type of Debt |
| Credit card balances | 45.4% |
| Debt secured by a primary residence (mortgages and related loans) | 42.1% |
| Vehicle loans | 36.9% |
| Education loans | 21.5% |
| Other installment loans | 10.5% |
| Debt secured by residential property that’s not a primary residence | 4.7% |
| Lines of credit not secured by residential property | 1.5% |
| Other debt | 5.2% |
Source: Federal Reserve data
Americans owe a lot of debt in general – over $17 trillion. Because there are so many types of debt, and debt is usually necessary for big things like owning a home or going to college, very few people are totally debt free. However, having some form of debt isn’t always a bad thing. A mortgage allows you to own your own home long before you’d have the money to do so, for example. And having some sort of debt is actually good for building credit – as long as you make your monthly payments on time and don’t borrow more than is manageable, your credit score will benefit.
Still, you should absolutely try to minimize unnecessary debt. For example, while it’s great to have a credit card, it’s not ideal to carry a balance on one unless you have an introductory 0% APR, as interest is expensive. You should try to pay your balance in full each month. In addition, you should avoid predatory loan types like payday loans and auto title loans that are extremely expensive.
How to Become Debt Free
- Assess Your Debt: List all your debts, including interest rates and minimum payments. This will allow you to take stock of your situation and prepare you to get organized and create a debt payoff plan.
- Create a Budget: Outline your income and expenses to understand where your money is going. After determining how much of your income you need to put toward non-debt expenses, decide what portion of the rest you are willing to put toward paying off your debt. You should also cut out any unnecessary expenses and redirect that money toward your debt. Then, track how you use your money and stick to your goals. You can learn more about how to budget on WalletHub.
- Build an Emergency Fund: Ideally, you’ll want enough money in the fund to pay for 3 to 6 months of expenses. You don’t have to wait until the emergency fund is entirely built to start paying down your debt, but you should put some money toward it each month.
- Choose a Strategy: Focus on paying off high-interest debt first (avalanche method) or the smallest balances first (snowball method). The first strategy will get you out of debt more quickly, but the second one can help keep you motivated by allowing you to meet individual milestones faster. You can learn more about the best way to pay off debt on WalletHub.
- Increase Your Income: If possible, find additional income sources like a part-time job or investments.
- Use Windfalls Wisely: Put unexpected money like tax refunds or salary bonuses toward your debt.
- Avoid New Debt: Resist the temptation to take on additional debt while paying off current obligations. The exceptions to this are if you use a balance transfer credit card or debt consolidation loan to put your debts in one place and lower your interest rate. Still, stick to the budget that you made and don’t make frivolous purchases.
- Use the Island Approach: The Island Approach is when you use different credit cards for different types of transactions. It emphasizes keeping your everyday expenses separate from other types of balances like balance transfers and purchases that won’t be paid in full, so you can maximize the effectiveness of your payments and accrue as little interest as possible. Most importantly, you should strive to pay your everyday expenses in full each month.
- Seek Professional Help if Needed: Consult with a financial planner or debt counselor if you need assistance.
- Stay Committed: Understand it's a gradual process, and stay committed to your plan. Celebrate small victories along the way.
- Review Regularly: Regularly review your budget and debt payoff strategy, making adjustments as necessary.
By following these steps, you can work methodically toward becoming debt free. It's a challenging journey, but with discipline and determination, it's achievable. You can learn more about how to pay off debt on WalletHub. You can also take advantage of free tools such as WalletHub’s credit card payoff calculator and mortgage payoff calculator.
This answer was first published on 08/25/23. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
FAQs
Around 23% of Americans are debt free, according to the most recent data available from the Federal Reserve. That figure factors in every type of debt, from credit card balances and student loans to mortgages, car loans and more. The exact definition of debt free can vary, though, depending on whom you ask.
What percentage of America is debt free? ›
What percentage of America is debt-free? According to that same Experian study, less than 25% of American households are debt-free. This figure may be small for a variety of reasons, particularly because of the high number of home mortgages and auto loans many Americans have.
What percentage of Americans are in bad debt? ›
However, 35% of Americans reported that they're in the most debt of their lives. New York Fed data shows that U.S. household debt swelled to $17.5 trillion last quarter, with credit card balances making up about $1.13 trillion of it — a new high for credit card debt.
What percentage of people have no credit card debt? ›
Percentage of people who have more credit card debt than emergency savings, by gender and income
| Year income | Credit card debt | No credit card debt and no emergency savings |
|---|
| Less than $50,000 | 42% | 18% |
| $50,000-$74,999 | 39% | 4% |
| $75,000-$99,999 | 38% | 4% |
| $100,000 or more | 21% | 1% |
1 more rowFeb 22, 2024
A stunning new Bankrate survey of 1,030 individuals finds that more than half of American adults (56%) lack sufficient savings to shoulder an unexpected $1,000 expense.
Can a person live debt free? ›
So, when you hear about people who have absolutely no debt, live on less than they make, and have a stash of cash for emergencies, you might think they're . . . weird. But living a debt-free life isn't only for a special group of people. It's something anyone can do with hard work and some special characteristics.
What percentage of Americans are mortgage free? ›
By the numbers: The share of mortgage-free U.S. homes has jumped from 34.3% to 39.3% in the past decade, per the census data. Between the lines: There can be a psychological perk to paying off a loan early, but according to some personal finance experts, it could be smarter to invest that money instead.
How many Americans are 100% debt free? ›
Around 23% of Americans are debt free, according to the most recent data available from the Federal Reserve. That figure factors in every type of debt, from credit card balances and student loans to mortgages, car loans and more. The exact definition of debt free can vary, though, depending on whom you ask.
What is the #1 cause of debt in the US? ›
The largest percentages of the average consumer debt balance are mortgages.
Who owns over 70% of the US debt? ›
Of the $33T of debt, roughly 78% is owned by the public (70% US vs 30% International). The major US public owners include the FED ($6T, but they are no longer buyers), mutual funds, banks, states, pension funds and insurance companies.
Running up $50,000 in credit card debt is not impossible. About two million Americans do it every year.
Is it rare to have no debt? ›
Between mortgage loans, credit cards, student loans, and car loans, it's not uncommon for the typical American to have one or more types of debt. The ones who are living debt-free may seem like a rarity, but they aren't special or superhuman, nor are they necessarily wealthy.
What is the average credit score in the United States? ›
The average FICO credit score in the US is 717, according to the latest FICO data. The average VantageScore is 701 as of January 2024. Credit scores, which are like a grade for your borrowing history, fall in the range of 300 to 850.
What percent of Americans live paycheck to paycheck? ›
A majority, 65%, say they live paycheck to paycheck, according to CNBC and SurveyMonkey's recent Your Money International Financial Security Survey, which polled 498 U.S. adults. That's a slight increase from last year's results, which found that 58% of Americans considered themselves to be living paycheck to paycheck.
How much does the average American have in checking? ›
Average household checking account balance by age
| Age range of reference person | Average checking account balance in 2022 | Median checking account balance in 2022 |
|---|
| Under 35 | $7,355.53 | $1,600.00 |
| 35 to 44 | $15,309.92 | $2,500.00 |
| 45 to 54 | $20,155.22 | $3,400.00 |
| 55 to 64 | $17,515.35 | $3,500.00 |
2 more rowsOct 18, 2023
The average American has $65,100 in savings — excluding retirement assets — according to Northwestern Mutual's 2023 Planning & Progress Study. That's a 5% increase over the $62,000 reported in 2022.
What percentage of US population has debt? ›
The total personal debt in the U.S. is at an all-time high of $14.96 trillion. The average American debt (per U.S. adult) is $58,604 and 77% of American households have at least some type of debt. Let's pause a second to define debt.
How much the average American is in debt? ›
The average debt an American owes is $104,215 across mortgage loans, home equity lines of credit, auto loans, credit card debt, student loan debt, and other debts like personal loans. Data from Experian breaks down the average debt a consumer holds based on type, age, credit score, and state.
What percentage of Americans are living paycheck to paycheck? ›
A majority, 65%, say they live paycheck to paycheck, according to CNBC and SurveyMonkey's recent Your Money International Financial Security Survey, which polled 498 U.S. adults. That's a slight increase from last year's results, which found that 58% of Americans considered themselves to be living paycheck to paycheck.
