Credit cards are a way of life for many consumers. They are easy to use and safer than carrying cash. However, credit cards also come with a risk of incurring debts that the consumer cannot easily afford to repay. Credit card debt is a major financial problem for many people.
Definition
Credit card debt is the total amount a person owes on their credit cards. Credit cards have a revolving line of credit, meaning the credit card issuer will roll over the balance due on the card each month and only charge the customer a portion of the total of the amount due. The credit card issuer will charge interest on any unpaid balance left on the credit card each month until the customer pays the credit card debt in full.
Statistics
Many people who carry at least one credit card have a credit card debt. According to the law firm Hoffman, Brinker & Roberts, a report compiled by the U.S. Census Bureau determined that as of 2010 Americans have a total of $886 billion in credit card debt, with the average person carrying $5,100 in credit card debt. However, not every consumer carries a balance on his credit cards. Some 54 percent of credit card customers pay their balances in full each month, according to Hoffman, Brinker & Roberts.
Effects
The burden of credit card debt can put a financial strain on people. Customers trying to pay down large credit card debts often have to make adjustments in their spending to be able to afford debt payments; this can mean going without luxury items or neglecting to save for the future. Carrying a high balance on a credit card also reduces the consumer's overall credit rating. If the consumer defaults on the debt, his credit score will be reduced even further.
Dealing with Debt
Credit card customers can pay down their debts by creating a budget and putting any discretionary income toward their credit card payments. Customers can also work with their creditor directly. Some credit card issuers will reduce the customer's monthly payment or offer them a settlement amount to pay back their debts. Customers can also seek help from a credit counseling agency.
Warnings
Consumers should pay down credit card debt as soon as they are able. Carrying over a balance each month will result in more interest fees and increased debts. Consumers who are considering working with a credit counseling agency should research the company before joining and only work with a highly rated, reputable counseling agency. Some agencies may charge high fees or use dishonest tactics.
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