Credit card debt is rising among consumers in the U.S., which can result in wage garnishment and other financial difficulties.
In the years following the Great Recession, countless people in Kansas as well as other states faced insurmountable financial challenges. These difficulties were often impacted by unemployment, foreclosure and credit card debt.
For a few years, credit card debt declined while Americans fought to regain their financial footing. Many found debt relief through bankruptcy and started over with a clean slate. However, it appears that consumers are starting to add to their credit card debt again. According to CNBC, people are charging more with cards today than during the previous six years. The average household credit card debt is now $6,802, an increase from the first quarter of 2014. Financial experts predict that by the end of December, American households will owe about $7,000 on credit cards alone. This number is creeping close to the $8,400 that was the average credit card debt when the recession started.
Credit card debt is one of the top forms of consumer debt
Many families will increase their debt during the holidays. In fact, consumers spent more than $600 billion during the holiday season last year. However, Christmas and Hanukkah presents are not the only reason for increased credit card spending. According to Investopedia, many families carry higher balances on their cards due to vacations, school shopping and household necessities. This spending has resulted in credit card debt being the third-largest form of debt for families, after student loans and home mortgages.
Financial advisors say that banks are approving credit cards to consumers more easily these days, as well as providing lower interest rates. These factors can make spending with credit cards quite attractive. However, they also make it easier to fall into the trap of excessive debt.
Additionally, many consumers are finding themselves having their wages garnished if they are unable to make credit card payments. According to National Public Radio, it is legal for lenders in Kansas to garnish up to a quarter of consumers’ wages over most types of debt, including credit cards. Today, about a tenth of those between the ages of 35 and 44 are having their wages garnished over outstanding debts.
Common credit card mistakes
Does this mean consumers should forgo credit cards completely? Since credit cards can be an important part of improving and maintaining good credit, it can be beneficial to have a card, but consumers should be careful, states Bankrate. There are several mistakes credit card owners should avoid. These include:
- Paying the minimum payment instead of paying $20 to $50 extra each month, which will reduce the amount of interest paid over time
- Making payments late, which can negatively affect one’s credit rating
- Taking out a credit card instead of paying with cash or a debit card
- Using cash advances, which often come with higher interest rates and other fees
A smarter way to handle credit cards, advisors say, is to keep the balances low or pay them off each month. The money that is saved on interest can instead be put into a savings or retirement account.
Anyone can suffer from unexpected financial challenges that can prevent them from paying on credit cards and other types of debt. If you are having trouble, filing for bankruptcy may allow you to get back on your feet.
Keywords: bankruptcy, credit card, debt, Chapter 7, Chapter 13