According to the Federal Reserve, the average household credit card debt as of 2012 was just over $15,000. The majority of consumers who use credit cards report carrying debt from month to month and a growing number of people are using credit cards to cover daily expenses like groceries and fuel. No matter how much you owe on credit cards, you may want to seriously consider the ramifications of debt on your lifestyle, family and future.
Don 't Lose Control
Unless you are using credit cards responsibly and paying off debt each month, you are giving up control. Carrying a balance means you will owe money in the future. As your credit card debt mounts, you give up control of some part of your future income because it will be required to make
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Although proper use of credit cards can increase your FICO score and make it more likely you will be approved for things like car loans and mortgages, a high debt-to-income or high debt-to-credit limit ratio can reduce your FICO score. Your debt can even cause problems in the work place as more companies are running credit checks before hiring applicants. This is especially true for management or financial positions.
Benefits of Getting out of Credit Card Debt
When you learn to pull yourself from the mountain of credit card debt, you take control of your own finances. Benefits for yourself and others include:
Saving money as you are no longer paying high interest on balances;
Ability to budget money and spend on items you need or would like rather than pay credit card
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To avoid recreating the problem, you need to change how you think about credit card debt. Never use credit cards to pay for luxury items if you don 't have cash on hand to pay off the balance. If you don 't have the cash, you don 't need the item. Pay off balances as soon as possible and only keep one or two cards open to reduce spending temptations.
A Common Obstacle to Getting out of Credit Card Debt
One of the biggest obstacles many people face when dealing with credit card debt is the constant emergency. They use all their funds to pay down debt. When the car breaks, medical bills arrive or another emergency comes up, they are forced to pay with a credit card. The best way to avoid this obstacle is to plan ahead. Before and during the time you start reducing credit card debt, create a savings account for rainy days. At minimum, save $1,000. You will be even more stable if you save a few months ' worth of expenses.
Paying off credit card debt is not an easy thing to accomplish, but you will gain so many benefits. You will take control of your life, your future and your finances, reducing stress and increasing overall quality of life. Get started today by defining what you own and creating a plan to pay it
Debt is heavy. It sits on your shoulders and weighs you down. Debt is also addictive. It 's easy to throw something on credit when you don 't actually have the money to buy it. It gives you instant gratification, and that can feel good - in the moment. But, for many people, there comes a point where they can 't use their credit anymore and debt is all they are left with. The stress of having to pay it all off can take its toll on your happiness and health, so you must come up with a way to get out of debt and start living a debt free life. Following are two things that will help you get out of debt once and for all.
Start the debt snowball by paying minimums on all of your debts except the smallest one. Place any extra money to that smallest debt. This will make that debt paid off much quicker.
Over-Utilisation of Your Credit Card Limit: People often over utilise their credit card limits and this result in a high credit balance in their account. High balances on credit cards are also a cause of low credit scores. It is always better to pay your credit card bills every month. If you are not able to control your spending habits, then it may make sense to go for a card with a lower limit. This way, you will not build up a large debt and easily be able to pay all your dues. Another thing to note, credit card bills have a minimum sum to pay along with the overall outstanding. If you are unable to pay off the total amount you owe, it makes sense keep paying the minimum amount due until then.
Wilson states that for the 65 percent of students that graduate with debt, the average amount owed is a staggering $20,000.00. On the contrary, as many as a third of all college students will graduate with no debt at all. Some may think that $20k is an outrageous amount of debt. But if you consider what the average adult spends on their first new car, it puts things into perspective. A new 2016 Nissan Rogue SUV for $20k could be paid off in an average of 4-5 years. This is where one would argue about what
This may seem like a no-brainer, but one of the most important steps to improving your credit score is to pay all of your bills on time. Even making payments a few days late can have an impact on your score, so try to always pay on (or, even better, before) the due-date.
Fewer people are saving money. Instead, they rely on the plastic. However, the average credit card holder pays $1200 in credit card interest. You would think that those individuals would figure this out and start putting that $1200 into saving for “emergency purposes only”. It seems odd that so many people say that their credit card debt is nothing they worry about.
Credit card debt is one of this nation’s leading internal problems. When credit was first introduced, and up until around the late 1970’s, the standards for getting a credit card were very high. The bar got lowered and lowered to where, eventually, an 18 year-old college student with almost no income and nothing to base a credit score on previously could obtain a credit card (much like myself). The national credit card debt for families residing in the United States alone is in the trillions (Maxed Out). The average American family has around $9,000 in debt, and pays around $1,3000 a year on interest payments (Maxed Out). Many people have the concern today that these interest rates and fees are skyrocketing; and many do not understand why. Most of these people have to try to avoid harassing collecting agents from different agencies, which takes an emotional and psychological toll on them. While a lot of the newly recognized “risky” people (those with a doubted ability to make sufficient payments) are actually older people who have been customers of certain companies for decades, the credit card companies are actually consciously targeting a different, much more vulnerable group of people: college students. James Scurlock produced a documentary called Maxed Out on this growing problem, in which Senator Jack Reed of (Democrat) of Rhode Island emphasizes the targeting of college students in the Consumer Credit Hearings of 2005
We now live in a society where kids start their adult lives “in the red”, as their debt exceeds their income. (Draut, 2005) 60 years ago this wasn’t the case, as told by Studs Terkel in Hard Times-An Oral History of The Great Depression, “I had no idea how long $30 would last, but it sure would have to go a long way because I had nothing else. The semester fee was $22, so that left me $8 to go.” (Turkel, 1970) Imagine that! 60 years ago tuition was $22 dollars a semester! Furthermore, 45% of adults under 35 state they find themselves resorting to credit card use for basic living expenses like rent, groceries and utilities, (Draut, 2005) adding to their mounting debt. This use of credit puts them into an entirely different category of indebtedness: survival debt. (Draut, 2005) Imagine being forced to borrow to live! (Draut, 2005) If a car breaks down or someone gets sick, the only option available is using a credit card. (Draut,
Within the class we use lessons from a man called Dave Ramsey who knows how to eliminate and stay out of debt. He has helped thousands of individuals and even started his own “university”, known as Financial Peace University, it’s a course to help ensure financial greatness in one’s future. If I apply lessons that I have learned and will learn from this, then perhaps I will be capable of having a stable financial future. One of the convictions he holds is that you should avoid credit cards entirely because they are a financial black hole. I find his view to be a tad extreme, yet it is founded upon solid principles and facts. Credit cards can very easily deceive one into debt. Some of the other ideas I’ve learned from consumer math include always having an emergency fund and putting money away for your future. While it is often tempting to spend the money left at the end of the month, it is very short sighted and provides little or no benefit for the
The debt will never get cleared up if charges keep appearing on the bill, and even when purchases stop the debt is normally so extensive it takes months if not years to pay off and it can completely plummet a credit score. Also, “College students who are unprepared for financial decision making may make risky decisions such as compulsive spending and debt accumulation. Financial stress impacts both academic achievement and retention.”Stores will try and get many to sign up for their cards and they do this by offering deals. The more cards owned, the more available to spend, which will lead right back into debt. However, a good idea to stay ahead is to pay as much off as much as possible each month. It does not have to be paid in full, but try to at least pay more than the minimum. Debt is all over the world, it 's not just with college students, but with older people as well but college students need to know what debt is good debt and when their limit is before they are drowning in
Two-thirds of all students graduating from American colleges and universities are graduating college with different levels of debt. According to The Institute for College Access and Success (TICAS), the average the student loan debt is at it’s lowest $26,000 and the most can be up to $100,000. College loan debt is not only negative for the students, but for the economy as well. Student loan debt has reached its highest point at $1.2 trillion, according to the Consumer Financial Protection Bureau. As of 2015, student debt is the second highest in the country from consumer debt, behind mortgages.
D. Thesis and Preview: It is important to know how to use credit cards to your
If we don 't have credit cards, we can’t build our credit history. If we don 't have a credit history, we aren 't allowed to buy cars or houses with low monthly payments. Having credit cards is a cycle in life because without one thing, we can 't have the other. When people have credit cards they have to use them. It doesn 't help that banks offer many credit cards to people, ending in high debt. Banks also encourage low monthly payments. If people pay low monthly payments, they will never end up paying their credit card debt off. They will probably end up paying for the objects they bought, two or three times. People aren 't forced to pay high monthly payments in order for it to take longer to pay the card off. If it takes longer for a person to pay a credit card debt, the credit card companies will be making a lot of money. I can definitely say I have experienced this because I am always offered to get a credit card. There are many stores that carry their own credit cards, and offer them for their customers. Offers are tempting and they can add to a future of credit card debt.
The lack of knowledge plays a big part in the debt young people are getting themselves into. Credit cards are often offered to young adults as soon as they get out of high school. Many take advantage of having a credit card without even thinking about the responsibilities that come with it, instead they think about the things they will be able to buy. In “Generation Debt” the author Tamara Draut says that young people are getting into debt younger than ever before. Two of the reasons that are more costly on young students that hit hard on the budget are car repairs, and travel for students who have families and friends in other states (231). From my experience I know first-hand what it was like to be offered credit cards right out of high school, and I didn’t hesitate to get any of them. I st...
The introduction of the credit card first came around while the economy was booming in the early 1950’s. American consumers were in buy mode and the credit card was a genius idea to let people buy now and pay later. At first look this idea seemed great but what looks and sounds great does not always mean that it is going to be great overall. Over the years credit agencies have released thousands of credit cards with several questionable polices and high interest rates. “Any given American family in the present day possesses an average of eight credit cards with about 15,000 dollars of debt”(Canner 8). Many consumers have become addicted to wasteful cyclic consumption and living beyond their income due to the ownership of credit cards. The invention and continued implementation of credit cards into the American economic and social systems appears to be the cause of the struggling economy, the weakened U.S. dollar, the sky rocketing prices of gas and grocery store goods, the all-time highs of American debt, and social deprivation in some regions.