Credit card debt reaches record high
This affects everyone.
According to this article, Credit Card Debt All Time High
consumer credit card debt has now reached an all-time high of $1.1 trillion.
The main thing that causes people to carry a balance on their credit cards?
Instead of paying cash like we used to, more and more people are charging everyday living expenses, including groceries, on their credit cards.
It’s convenient, fewer and fewer of us carry cash these days, but it comes at a cost.
Frequently, people spend more by paying for things with plastic than they would if they were paying by cash.
Also, charging living expenses results in paying additional fees like credit card interest.
Over the course of the year, it adds up.
Higher Credit Limits mean Higher Consumer Debt
The average consumer credit card debt today stands at $6,200 per person.
What’s worse, the credit card companies keep raising your limit.
The average credit card combined limits per person are now up to $31,000.
Psychologically, not seeing the cash leave your wallet makes spending somehow less real. And, people are now more focused on being able to make their monthly payments than they are on the actual amount of debt that they owe.
This is a false sense of security.
In my bankruptcy practice, I see this every single day.
Credit card debt is the number one reason that people end up having to file bankruptcy.
In southern Ohio, where I practice, the average amount of credit card debt that I see in a typical Chapter 7 cases between 20 and $30,000.
Not surprisingly, this is about the maximum amount of credit that the credit card companies give people.
It doesn’t take much, an interruption in income, job layoff, or medical problem, to cause us to get behind in our payments. This generally results in late fees and lower your credit score. When that happens, the credit card companies often lower our credit limits. Sometimes this results in a card going over limit even if you don’t spend anything.
Would you like to have a shock?
Take a look at one of your credit card statements.
Specifically, look at that box that federal law now requires the credit card companies to put on all statements. You’ll see that if you simply pay the minimum monthly payment on a typical credit card that you will be in debt for years and pay more than twice as much as you charged.