In the past, however, just obtaining a credit card was a challenging process, reserved only for the most creditworthy people. In modern times, even people with bad credit can easily obtain credit cards, though the associated fees and interest rates they pay are normally high. Though credit card use is common, there are many financial consequences that come with it, including accrued debt.
Features
Credit cards enable consumers to buy goods and services they might not have been able to otherwise afford. The resulting credit card debt can be repaid quickly as long as you pay your balance in full for all of your statement cycles.
Misconceptions
Many credit card holders wrongly believe that as long as they pay the minimum monthly payment, it is possible to quickly emerge from credit card debt and gain a zero balance. The truth is that it is extremely challenging to pay off credit card debt in a timely manner due to compound interest charges. It is also a common misconception to believe that credit card debt is tax-deductible.
Expert Insight
Experts in personal finance vary in how they believe consumers should manage credit card debt. Some claim that you should aggressively pay off your credit card debt. Others believe that credit card debt is useful in that it enables individuals to meet a variety of needs in a way that would not be possible without credit.
Fees and Interest
Fees and interest charges contribute to compiling your credit card debt. In certain cases, a fairly small credit card debt balance can quickly expand to become something much larger due to additional credit card charges.
Size
The amount of credit card debt owed by each American family varies depending on their spending habits as well as the amount of credit available to them. According to IndexCreditCards.com, the average credit card debt in America is $4,013 per adult and $7,861 per household. The Federal Reserve Board estimates that consumer debt totaled around $928 billion in America in 2009 alone.
Considerations
If you have a high amount of credit card debt (exceeding $2,000), you can consult non-profit consumer credit counseling services for financial education assistance in order to help you decrease your credit card debt and keep it down in the future.
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