Repaying Credit Card
Debt
In the U.S.,
some statistics for credit card debt are simply staggering. As the average
family usually has a balance between five and eight thousand dollars on their
credit cards, over one thousand dollars is paid on interest each year per
family. These figures mean that Americans spend over one trillion dollars each
year on credit, and end up owing more than half that.
This also means
that currently more than 90% of Americans' disposable incomes are dedicated
solely to repaying debt. Debt continuing grow at this rate will mean that one in
a hundred families will be forced into bankruptcy.
Growing Debt
It wasn't so far in the past that being in even a little
debt was considered to be terrible. Common practice dictated that you saved for
products and services and bought them once you had enough money. Further, bad
credit meant you couldn't get a credit card at all. Go back fifty years and
consumer debt figures were incredibly low, as they are today in most of the
non-Western world.
But here in America saving seems to be
forgotten. There's barely anybody saving enough for their retirement, and banks
have to offer ever-higher interest rates as incentives to have people put money
into a savings account. The United States especially has
developed an ‘I-want-it-now consumer culture, and to an extent that we cannot
afford to live this way.
Debt—A National Problem
Countless billions of dollars are being used
up on expenses in the credit card industry, which only serves to charge interest
on its customers. This is due to the weight of the calculations, administration
and marketing needed to support the industry. For example, the average American
gets at least one credit card offer in the mail every day, showing heavy and
costly marketing.
These calculations are before you take into account the
money and time spent by bankruptcies in the court system, as well as the cost to
the government of providing subsidized debt counseling. Further, when these
consumers have to spend money on interest instead of products it reduces
money flow and hurts the whole economy. Few industries, or people,
aren't hurt by debt, at least in the long run.
Spending Alone Isn't the Culprit
With all of this said, don't assume that the
reason you're in debt is that you haven't spent your money cautiously enough.
According to current statistics, it is rare for people to get into debt only
because they spend their money frivolously.
The majority of people get
buried in debt due to external circumstances such as losing their job or getting
sick and taking out credit cards to pay while they don't have a source of
income. Thus, interest starts accumulating and their debt spirals out of
control.
Overall,
most people are fairly rational and understand what they can and cannot afford.
The problem occurs when these people leave a balance on their credit cards and
allow these rational purchases to produce heavy interest which traps them in
debt.
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