Back in the 1950s, credit cards were used mostly for dining out (hence, “Diners Club,” the progenitor of the modern-day credit card) and were held by few.
Today, an estimated 183 million Americans have credit cards—and we use them for everything from big purchases, like furniture and appliances, to buying a cup of coffee.
It’s convenient and makes it easier than fishing out bills and change to pay for a purchase.
But once that bill shows up in our mailbox or inbox, it can be a shock.
It’s also too easy to pay the minimum month after month, only to find that the balance not only doesn’t go down, but often increases.
According the New York Federal Reserve, non-housing debt hit $4.06 trillion, including a $20 billion increase in credit card balances, in the second quarter of 2019.
There are many reasons why people get into credit card debt.
Here are some of the most common:
1. Not having a budget
When everything was paid in cash (including writing checks), it was relatively easy to know where your money was going and most households had a budget.
Credit cards make it all-too-easy to not track spending, so, even if what we purchase on credit seems reasonable, like new tires for the car or winter coats for our children, it adds up quickly.
Budgeting may seem old-fashioned, but not having one can quickly put you in credit card debt.
Sure, emergencies happen and you may need the plastic to cover those, but it’s wiser to budget money for those items you know you are going to need.
2. Minimal savings
Even with the current increase in employment, the fact remains that “personal savings declined from about 10 percent of disposable income in the early 1980s to 1.8 percent in 2004.
The decline has received particular attention recently because saving was negative in 2005 for the first time since the Great Depression.”
In fact, according to a 2018 survey, 21 percent of those polled stated that their credit card debt was higher than their savings.
The average interest payment for those who don’t pay the full amount of credit card debt each month: $855 per year.
3. Loss of income
Loss of income can come from more than being fired or laid off.
A cut in hours or downward shift in job responsibilities can also put a sizeable dent in earnings.
Divorce is a leading cause of lost income, since it may mean that there are no longer two incomes supporting a single household and spousal or child support payments cut into the paycheck.
A medical emergency can mean loss of income if you are unable to work. Moreover, medical expenses can cause a household debt crisis and are often cited as a leading cause of bankruptcies.
4. Irresponsible use of credit
Credit cards are not “free money,” but it can be tempting to make those impulse purchases when you don’t have to use cash.
In fact, most people spend much more when they use a credit card instead of money.
Most credit-card users don’t start out as credit-card abusers, but it’s an easy trap to fall into, especially for young or first-time credit-card holders.
When you are in over your head in credit card debt, contact our Bronx bankruptcy attorney
It can happen to anybody, but don’t let overwhelming credit card debt ruin your life and put your family in financial jeopardy.
To learn about your options, contact us online or call our office at (718) 863-6000 to schedule a free consultation with Bronx bankruptcy attorney Thomas M. Denaro.
