What You Need to Know About Credit Card Debt
By Eric Wood
With the current U.S. recession dragging on, unemployment at its highest rate in over a quarter century, and home values that have plummeted in recent years, consumers from coast to coast are finding themselves struggling with credit card debt. Many would say that they are finding it difficult to simply stay above the financial water line.
We could make some very good points regarding the how and the why credit card debt has become such an issue. During the boom times of the not too distant past, credit card issuers were quick to flood the consumer market with credit card offers. In many cases these cards were pre-approved. All that was required was to simply sign, date and return the application in the pre-paid envelope. Soon after, a shiny new card with a generous limit would be on the way.
Wasn’t life grand?
Consumers could expect to receive offer after offer after offer, week after week in their mailboxes. Who could blame anyone for spending like there was no tomorrow? Yet truth be told, many people would say that they were simply spending to make ends meet; spending and charging for necessities, rather than spending carelessly. And this is probably the case for many.
Credit card debt among consumers in general has now reached what many consider epidemic proportions. When millions have maxed out their credit cards and now find it difficult to pay even their minimum monthly payments – this is cause for concern. Compounding this issue of struggling to make the minimum monthly credit card payments is the fact that many card issuers have now begun raising interest rates, fees, and more importantly – the minimum credit card payment amount.
The new standard amount for the minimum credit card payment each month has gone up from 2% of the total balance owed to 5% of the total balance owed. Let’s put that in perspective: If a person’s minimum monthly credit card payment previously was $500 per month – with the increase that minimum monthly payment would now be $1,250. Talk about sticker shock. This has had a devastating effect on consumers across the nation that have already been struggling to make ends meet.
It’s not surprising that so many consumers are now in debt when you combine the easy availability of credit in years past, with the new rate hikes and fee hikes being levied by the credit card companies. Debt is one of those things that has a way of accumulating in the way that a snowball can continue rolling until it becomes the foundation for a large snowman. Debt can cause stress, anxiety, depression, sexual dysfunction, and sleepless nights. It can be truly debilitating when one realizes what a chokehold it has put on one’s life.
In part 2 of this series we will discuss the actual ways, means and programs of debt relief that are the most effective at both reducing and eliminating debt. But we will end part one of this series discussing bankruptcy.
Bankruptcy at first glance may sound like an answer to a consumer’s financial predicament, yet there are serious consequences and repercussions to a bankruptcy filing. These include:
- Destruction or implosion of the filer’s credit record
- Bankruptcy remaining on the filer’s credit record for up to 10 years in some states
- Inability or difficulty to obtain future credit
- Hefty deposits when requesting basic home utilities
- Inability or difficulty to rent an apartment in one’s own name
- Possibly being passed over for a job – as more and more employers these days conduct credit checks as part of their routine job applicant screening process.
Therefore, a bankruptcy filing is something not to be taken lightly – despite what the TV lawyers may tell you. So what are your options for reducing and eliminating credit card debt? That we shall discuss in part 2 of this series.
Credit Card Act 2009