Because the definition of “everyone else” is open to interpretation.
Liz Pulliam Weston's article on MoneyCentral today is a continuation of her stance that mainstream reports of American indebtedness are wrong on the high side. The big lie about credit card debt, she contends, is that many often-cited figures of household credit card debt are several times too high, and paint Americans to be much looser in the wallet than they actually are.
(I seem to remember that I may have been guilty of quoting a similar high number, so my bad.)
The “good” statistics she quotes are from are Federal Reserve Board's Survey of Consumer Finances for 2004. This is a triennial survey. Changes from the 2001 survey to the 2004 survey are summarized in this report. Some of the more questionable statistics, she suspects, gained traction from figures published by CardWeb.com. After following the link to CardTrak.com, I found a recent edition of their newsletter. (At the time this article was posted, the linked newsletter was for July 2007.) The first article gives figures on card debt — figures that are in-line with the inflated figures she speaks of in her article.
The Federal Reserve study (for 2004) gives the median household credit card debt at $2,200, while the CardTrak.com newsletter quotes this same figure as $6,600. The average household credit card debt, according to the Federal Reserve study, was $5,100; from CardTrak.com, $9,900. The 2007 Federal Reserve study numbers won't be out for a while, so until then the comparisons are not apples to apples. However, the numbers often quoted in the media for average household debt have been higher than the Federal Reserve study numbers, so this comparison still carries some weight.
The reason why different studies come up with vastly different answers to the same question is because the methodology in arriving at the answer can be vastly different. If I had to trust one of them, I'd probably trust the Federal Reserve-sanctioned methodology more than CardWeb.com's, for the simple reason that the government and its charges are masterful at producing statistics. Not that CardWeb.com's methodology is shoddy by any means: CardTrak has been in the business for two decades, the recent survey had a sample size of 55,000. The newsletter suggests that the survey was an online survey, which excludes those without an internet connection and thus adds a different flavor to the sample population. I suspect, though, that the Federal Reserve was a little more painstaking in obtaining representative demographics.
Anyway, let's say a household owes $4,400 on their credit cards. What does this mean? The Federal Reserve would say that the amount they owe is twice the median. CardTrak.com would say that they owe less than the median.
So what? If that household owes $4,400 on their cards, they owe $4,400 on their cards, regardless of where they fall in the group. That's all it says. It's that household's $4,400 in credit card debt — no one else's. None of those other households in the study (save one or two, maybe, that happen to be related to that household) care what that household owes.
I could gain a little solace in the observation that, according to the Federal Reserve study, I owe less on my house than the median household. But that doesn't matter. I still owe a heck of a lot of money — about a year's worth of income from my day job, before taxes. I have to look at debt in the context of my life, not in the context of some study. No one in that study is going to help me pay off my mortgage, nor do they even care what I owe.
So regardless of whose numbers are “better,” they don't really matter one way or the other to the individual. Maybe the best course of action is to ignore them?
