How Credit Card Debt Effects You
By Amber Knutson
The statistics are truly mind numbing and continue to get worse
each and every year. At the current rate about 1% or one in a hundred
families will be forced to declare bankruptcy at some point and
over 90% of Americans' disposable income is spent paying back debts.
Not a happy picture but as bleak as that sounds running won't change
it but knowledge may and so, let's take a quick snapshot at a few
of the current credit card debt statistics facing so many Americans
The American Consumer spends over 1 trillion (that's a 1 with 12
zeros) per year on credit card purchases. Not a big deal in and
of itself but the problem lies in that they end up carrying over
and paying interest on about half that amount or $500 billion. This
translates into a balance of between $5,000 and $8,000 per family,
with about $1,000 per year going just to pay the interest.
That's just the average - many people owe much, much more!
Excessive Debt Costs Everyone Money
Many American receive at least one new credit card offer in the
mail every day. The money being spent to service the debt industry
is truly immense. Billions are spent administering, calculating
and marketing the various aspects of the credit card industry.
Few industries or people escape unscathed, at least in the long
run by debt. The burden that bankruptcy puts on the court system
or the cost to government of providing subsidized debt counseling,
are just a few examples of how debt effects the nation. In addition,
consumers with excessive debt have less to spend and when money
isn't flowing, it hurts the economy.
Whatever Happened to Saving?
Debt is becoming increasingly more common. Not long ago, even a
little debt was considered to be absolutely unacceptable. When you
wanted something, you saved up for it and bought it ONLY after you
had enough money to actually pay for it. And, if you had less than
perfect credit, you couldn't even get a credit card. Look at consumer
debt figures as little as 50 years ago and they were absurdly low
- the way most of the non-Western world is today.
The reasons are many and everyone has an opinion but regardless
of the reasons, the art of saving, at least in the "western
world" seems to have been lost. Outside of a 401K or similar
vehicle offered at your place of employment, virtually nobody is
saving enough for retirement. Banks are starting to have to offer
ever-higher interest rates to get people to put money anywhere near
a savings account. In fact, few people even have a savings account
anymore. Most people have a checking account and that's it. Our
society and progressed into a "now" culture and the virtues
of patience that help grow this country seem to have been lost.
Whatever it takes to live life in the present with little regard
for the future, appears to be the prevailing sentiment.
Is Over Spending the Culprit?
Ok, I've been a bit harsh up until now but I don't want to give
the impression that the only reason you're in debt is because you
continuously and frivolously overspend. Other factors are involved.
Truth be told, many people get buried in debt because of the loss
of a job or an illness and they use credit cards to pay for basic
expenses. As a result, they fall into the downward interest trap
spiral as their debt grows out of control from just a few thousand
dollars initially borrowed to pay for essentials.
Most people do have a reasonable sense of what they can afford
and they don't just go out and use credit cards to buy any and everything.
Getting heavily into debt is usually a combination of many factors
but the problem lies in people leaving balances on their credit
cards for too long and not realizing just how deadly compounding
interest really is to their financial well-being.
About the Author: Amber Knutson is a contributing
writer to: Eliminate Credit
Card Debt and Debt
Consolidation and Managing
Debt. This article may be reproduced only in its entirety.
Published - December 2005