It's no secret that the issue of debt is a bigger problem for Americans today than ever before. For the first time in our nation's history, the savings rate in this country is negative. We are spending more money than we are earning. The problem is becoming more widespread as consumers take greater spending liberties with credit cards. In fact, the family with at least 1 credit card in the house has over $9000 in credit card debt.
Nearly one in three purchases in the US is made with plastic now, leading many to speculate that we may eventually complete all transactions electronically. Credit cards can be a useful tool, but their abuse can lead to misery for the cardholder. There are several reasons why credit card debt is a growing problem:
Industry/Ease of Obtaining Credit: Issuers of credit cards spent over $6 billion on mailing offers for credit cards, and the average adult receives over 20 such mailers every year. Between 1995 and 2006, the number of credit cards in the wallets of Americans was up 46% to 1.3 billion cards.
To qualify for a credit card today requires little more than a signature. Card companies have figured out that even if a small percentage of borrowers default or declare bankruptcy, the profits will still be substantial. The recent Initial Public Offerings of Visa and MasterCard stock show that shareholders believe these profits will continue to grow.
Enticing Offers: Because credit cards are so easy to get now, card companies realize that they need to offer something different from their competitors to get a consumers borrowing business. Promises of frequent flier miles, cash rebates, gift cards, and other goods and services accompany nearly every credit card offer. At every sporting event in this country, booths are setup where a consumer can sign up for a credit card and receive a T-shirt or beach towel of the team they are supporting.
College campuses offer gifts to college students in hopes of getting accounts going with them early. There is no disclosure of the dangers of credit card debt with these offers, and too many people put their long term credit at risk for a short term reward.
Lack of Discipline and Education for Young People: The biggest problems with credit card debt are with young people, who seem to get themselves in trouble before they know any better. The average college student carries $2200 in credit card debt, and graduate students carry $5800 on average. These students seem to think that because they'll have higher paying jobs after college, they will be able to pay off their debt down the road.
By the time they realize the trouble they're in, it's often nearly impossible to recover. Credit card debt will burden many of these students for years to come.
The answer to our credit card problems lies in discipline and education. If you can't afford to pay off your credit card at the end of the month, you may need to reconsider making unnecessary purchases.
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Is credit counseling the ideal way to get out of debt? It might be, but there's no single best way for everyone. Visit the Debt Smackdown website at www.debtsmackdown.com for more helpful tips & advice about getting rid of your debt for good..
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