Credit Card Debt

There is NO positive side to credit card use. You will spend more if you use credit cards. Even by paying the bills on time, you are not beating the system! But most families don't pay on time. The average family today carries $8,000 in credit card debt according to the American Bankers' Association.

Now let's talk about the rebates. If you were using a credit card at 5%, you would have had to have spent $80,000 to get $4,000 rebates on new cars that lost $6,000 of value when you drove them off the lot. That is not a good deal!

When you pay cash, you can "feel" the money leaving you. This is not true with credit cards. Flipping a credit card up on a counter registers nothing emotionally. If you use credit cards instead of cash you will spend 12-18% more. This is money you could have saved. If you "have to" use plastic, I suggest a debit card. I use them for travel and the occasional convenience of ordering something over the Internet or phone.

Wikipedia says: "Credit card debt is an example of unsecured consumer debt, accessed through ISO 7810 plastic credit cards. Debt results when a client of a credit card company purchases an item or service through the card system. Debt accumulates and increases via interest and penalties when the consumer does not pay the company for the money he or she has spent. The results of not paying this debt on time are that the company will charge a late payment penalty (generally in the US from $10 to $40) and report the late payment to credit rating agencies. Being late on a payment is sometimes referred to as being in "default". The late payment penalty itself increases the amount of debt the consumer has."

From MSNMoney:

Bill Whitt at the VIP Forum, a Washington D.C. research firm, helped me dig even deeper. By analyzing the credit card debts of all the households the Fed surveyed, Whitt discovered:

Only 29% of households owe $1,000 or more on their cards.

21% owe $2,000 or more.

6% owe $8,000 or more.

4% owe $10,500 or more.

1% owe $21,400 or more.

Fair Isaacs statistics show a world in which most people are light to moderate users of credit:

About 48% of credit card holders owed less than $1,000

About 10% of card holders had total card balances in excess of $10,000.

More than half of all people with credit cards use less than 30% of their total credit card limit.

Just over 1 in 8 people use 80% or more of their credit card limit.

From Surf in the Spirit:

Credit card debt is perhaps the largest reason why so many of us go into debt every day. We have begun to use our credit for everything. The high prices that accompany using our checking debit cards have caused most of us to start using our credit cards instead.

The downside to this is that the interest rates alone can force the average person or family to eventually have to rely on bankruptcy. However bad this sounds, there are ways that you can avoid the credit card debt trap so that you can exercise better debt management.

For starters, you can keep your credit cards to a limited number. Why would you feel the need to have more than one credit card? Most of the people who have mounting credit card debts are having this problem because they have too many cards in the first place. If you want to have a card that you can use everywhere, try just having a Visa, MasterCard, or American express card which are all used everywhere.

You can also avoid making any purchases with your credit during peak buying seasons such as Christmas. Credit card companies charge you more interest during these peak seasons because they know that everyone is buying more items with their credit cards. Most of these companies will not make a point to tell you this, but they make a mint off of us at these times.

Another good step is to limit what you use you credit cards for. There is no real reason why you should be using your credit card to make daily purchases like groceries. If you prefer not carry cash around you can get yourself a debit card which works the same as a credit card, however, it is direct cash purchases. You are not charge often times to use these and you are using cash to make your purchases. Keeping your credit card debts under control is not easy for some people but we can all learn to avoid the many pitfalls that we all get used to falling into.

I recommend these links about credit card debt:

Credit Card Debt