The Average American Now Spends Over $7,000 On Interest Each Year

Americans and interest

  • Americans spend over $7,000 on interest and overdraft fees each year
  • $7,000 is 12% of a median American family’s annual income (about $59,000)
  • Americans Pay more in credit card interest than they do on car loans or student loans each year

Credit and loans are a huge part of the world’s financial system, but with borrowing comes interest — and we wanted to find out just how much each American is paying each year. We’ve taken data from the real estate experts at Zillow, as well as financial experts at Forbes and TransUnion, to determine that the average American now spends over $7,000 on loan interest each year.

Compare average interest rates on different financial services

AccountAvg Interest RateTermAvg Annual Amount
Mortgages3.8 %30 Years$4,499
Car Loans4.4%5-6 Years$631
Student Loans5.5%10-20 Years$1,027
Credit Cards16%Revolving Avg$889


Mortgage interest is the kind of debt we’re more comfortable carrying around long-term. It tends to have the lowest interest rate of any financial product, and you’re likely already expecting to pay a ton of interest when you’re borrowing from one-quarter to half-a-million dollars.

The average American pays almost $4,500 each year on mortgage interest alone on a home with an average sale price of about $250K, 20% down on the loan and an APR of 3.8%.

But while homeowners are primarily the focus of housing interest studies, renters shouldn’t feel left out of the equation. Are you a renter? Well, while your rent payments aren’t exactly going toward “interest,” these payments are similar to interest payments in the sense that you’re not getting that money back. Feel free to substitute your yearly rent to determine how much you’re spending on housing “interest.”

Car loans

Data shows that the average American spends about $36,000 when purchasing a new car and around $20,000 when purchasing a used car. As of May 2020, the national average APR for a car loan is about 4.4% with loan terms that range from 5 to 6 years. Altogether, the average car owner pays about $630 on interest per year when using financing.

Credit cards

The average American is carrying about $5,557 in credit card debt. This can be the worst type of debt to carry for the long term because interest rates average about 16%, which is much higher than the average car or home loan rates.

It gets complicated to pin down how much credit card interest the average American pays each year because there are several types of credit card users. For example, there are those who pay off their cards each month while many others always carry a large balance. We’ve averaged these out to determine that the average American pays about $890 in credit card interest each year if we’re using the average 16% interest rate.

Student loans

Most federal loans have a term of 10 years, while others can extend to 20 or 25 years — which dramatically increases the cost of the loan. The average student carries $32,731 in debt at a rate that can vary from 2% to 15% (we arrived at 5.5% APR as an average of the most popular student loans). That means the average American is paying $1,027 in student loan interest each year.

Overdraft fees and other short term loans

While overdraft fees may not seem related to, say, credit card or mortgage interest, it’s still important to include, since overdraft fees are essentially the same as borrowing money — only it’s a short term loan with horrible terms. We were also shocked to find that banks collected more than $34B in 2018 alone. That’s another $130 per year for every adult in the US on small, short-term loans from their bank via overdraft fees.

On that note, while millions of Americans utilize payday loans, the majority do not, so we did not include them in our calculations. Keep in mind, though, that loans of this nature require a quick payback, interest rates in the triple digits (often ranging from 100% to 500%, or even higher in some cases) — and there are fees on top of those as well.

Everyone’s financial situation is different

The numbers above will likely not match your exact financial situation. Interest is a part of our banking system and no one expects to pay $0 in any given year. However, knowing these averages can help you take a more informed look at where your money is going each year and help you make good decisions with your finances in mind.