Final answer:
Option a is the currect answer.The majority of household debt in the U.S. is in collateralized loans, with a substantial amount in credit card debt as well. Low wage growth led consumers to accumulate over $1 trillion in credit card debt by 2008. In 2021, the typical annual interest rate was between 12%-18%, leading to Americans paying billions in interest annually.
Step-by-step explanation:
The majority of household debt in the United States consists of collateralized loans, such as mortgages. Despite economic growth and increasing productivity since the 1990s, wages have not kept pace with inflation, leading many consumers to rely on credit. With low interest rates, financial institutions readily provided credit, which resulted in credit card debt exceeding $1 trillion by 2008. Furthermore, high-risk subprime mortgages were extended to consumers who often did not fully understand the terms, increasing their financial vulnerability.
In 2021, almost 200 million Americans had credit cards, with about $807 billion in outstanding credit card debts. The annual interest rate for credit card borrowing is typically between 12% and 18%, with 15% being a common rate. This means Americans collectively pay tens of billions of dollars in interest every year, not including fees for late payments or basic credit card usage.