For Americans, taking out loans is a trivial thing that doesn’t require much effort or knowledge. But before we talk about complications and problems associated with credit card debts, we need to learn some key facts about the whole process.
A credit card is issued mainly by credit unions and banks, allowing holders to get a certain sum of money in advance just based on the promise to pay back later. Using a credit card is a common thing all around the world, especially in the USA. A considerable number of personal financial processes are related to credit cards. The whole state of things can be reflected in the number of cardholders. Following the survey in 2016, over 68% of people above 65 years old had and used a credit card. And now this percentage keeps growing at an exponential rate.
Simplicity and convenience are the key advantages that make credit cards so popular. Contrary to checks and debit cards, credit cards provide users with an opportunity to take out short-term loans. However, such a benefit frequently turns into a great drawback, especially when borrowers buys something they cannot afford. At this point, the notion of credit card debt occurs.
Generally, the introductory interest rates are quite low, but only for a fixed time. Afterwards, the rates rapidly increase sometimes reaching 30%. The result may be not very promising, so that the holder may get into serious financial problems and even face bankruptcy.
Average Credit Card Debt Information
According to the information provided by the Federal Reserve, the total credit card debt in the United States amounted to around 0.78 trillion dollars, as in the 2nd quarter of 2017. However, the tendency is steadily growing, and the amount of revolving debt hits the number of 1,027 trillion dollars, as in March 2018.
The average credit card debt depends greatly on several factors, with the most important one being the way to measure it. Generally, the situation is as follows:
- $6,354 – average credit card debt (2017);
- $5,839 – per American adult with a credit card;
- $5,422 – excluding cardholders who do not use cards, as well as store cards;
- $4,087 – resident US adults;
- $1,841 – debt on the balance of store credit cards.
Top 3 Facts to Know about Credit Cards
- A credit card is not the synonym for debt. You can use the card for your personal purposes without owing money. Use the credit card merely as a payment method, and you will stay out of debt.
- Easy to owe, difficult to repay. You can easily sink into great debt if you do not pay due attention to your credit card balance. From the very beginning, the credit limit is rather low, but the increase of this indicator is frequently tempting. However, it is necessary to mind the interest rates, which increase accordingly.
- The relation between credit card debt and overall score. Staying debt free is a wise choice that provides the cardholder with an opportunity to take a loan and get low-interest rates. Only those Americans whose account balance is under 30% of the credit limit can maintain a high credit score. Timely payments are indispensable as a single missed payment may significantly downturn your score.
Problems with paying back credit card debt may turn into a big deal. You cannot go to prison, but a creditor can sue you garnishing your wages, taking assets and property. Therefore, stay aware of your current balance and charges to avoid serious credit problems.