Credit card debt is a major problem in the United States. According to the Bureau of Consumer Financial Protection, over 175 million Americans have at least one credit card. In addition, the Federal Reserve Bank of New York estimates that there are more than 519 million credit cards held by U.S. consumers. For those households with card balances, the average credit card debt is $6,569 with Americans owing a collective $804 billion in total.
Credit card companies promote credit card use through incentive programs, loyalty programs, promotions, and advertising. Consequently, many consumers find themselves struggling to make even their minimum monthly payments. But, new credit card offers may continue to arrive in the mail, along with credit card company checks inviting consumers to go ahead and “take that vacation,” or “make home improvements.” Because it is not difficult for credit card use to quickly get out of hand, buying regularly on credit may give you a case of the “credit card blues.”
Warning Signs
The following behavior may indicate behavior associated with the credit card blues:
- You use credit cards to pay for basic needs, like food and gas.
- You are only able to pay the minimum balance due on your cards each month.
- You are paying above-average interest rates and cannot find lower rates because of your credit score.
- You are not able to contribute to a savings account or IRA.
- You are not aware of how much you charge or how much you owe.
- You lose sleep over your mounting debt.
- You transfer balances frequently to avoid credit card payments.
If any of these sound familiar, it is important that you take action now and create a plan to pay down your debt to avoid making the problem even worse.
Getting Back on Your Feet
To begin, make and maintain a worksheet to track your credit card use. You may do this by hand, using different colored markers for different creditors, or on a computer spreadsheet. Be sure to include the names of your creditors, the last date of each payment, the annual interest rates, the minimum monthly payments, and the total amounts due.
Here are five simple steps to help you bounce back from debt:
1) Create a financial budget. Once you look at your expenses and figure out where all your money is going, you can look for areas where you can cut back, even temporarily, to free up some of your cash for credit card payments.
2) Set up a repayment schedule. Start paying the debts that carry the highest finance charges first and stick with it!
3) Hide the Plastic—until your present debts are under control.
4) Reduce your finance charges. Search for cards with the lowest possible rates.
5) Avoid using credit card company checks. Do not use these checks that come directly to you in the mail. The value of each check you use will be added to your existing debt—plus any extra transaction fees!
Safety Precautions
Of course, there are times when using a credit card is unavoidable. However, be sure to always keep your cards in a safe place, and separate them from your purse or wallet to help prevent theft. Further, do not give your credit card number out on the telephone, particularly if you did not place the call. Shred all carbon receipts, and unsolicited or unwanted credit cards or applications.
Remember, if you are charging more than you are paying, your credit card debt will always increase. Use your credit cards only for essential purchases and pay the balance as quickly as possible to avoid additional interest or late payments. A meeting with a financial professional can help you develop strategies for improving your spending and saving habits to get debt free—and stay that way.
Sources:
https://www.lendingtree.com/credit-cards/credit-card-debt-statistics/
Important Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This article was prepared by Liberty Publishing, Inc.
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