Ask the expert: How much is too much credit card debt?

Question: My mother is horrified that I usually have around $10,000 in balances on two credit cards plus several department store cards. But I make more than $100,000 a year, which is a lot more than my father made during any year he was working.

My father died last year, leaving my mom very little money but also no debt. He never owned a credit card, and my mom never worked. So I think she just doesn’t understand how the world works today, and that everyone has “too much credit card debt.” How do I convince her I’m doing OK?

— Karen in Vermont

Howard Dvorkin CPA answers…

You’re right about one thing, Karen: Debt is how the world works today.

Sadly, 77 million Americans — that’s 35 percent of all adults with a credit file — have a debt that’s gone into collections.

I’m not so sure I can back you up on everything else.

That $10,000 in credit card debt represents 10 percent of your income. If you consider that your debt to income ratio should be under 15 percent, you’re pushing it. Do you have a car loan? Student loans? You didn’t mention these in your question above, so I’d suggest you use our Debt to Income Ratio Calculator to learn this crucial stat.

If your DTI exceeds 15 percent, then your mother is right: Your credit card debt is a problem. Regardless, even if you have no other debts, I’m still concerned.

As a financial counselor for more than two decades, I’ve seen millionaires flying high and then hitting bottom. You simply can’t guarantee you’re always going to earn six figures. If you get laid off, Karen, do you have an emergency fund that can pay your bills for 3-6 months?

Are you saving for retirement? As I’ve written before, the best way to save for retirement is to retire your debts. The interest you save is free money.

I strongly urge you to read our step-by-step guide to get out of debt. It’s free and so is the advice. However, if you don’t have the time, you can always give us a call. Debt.com has certified credit counselors who can give you a free debt analysis, and you can decide from there who’s right – you or your mom. Call us at 1-888-503-5563.

Have a debt question?

Email your question to editor@debt.com and Howard Dvorkin will review it. Dvorkin is a  CPA, chairman of Debt.com, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.