If you are still suffering from a
case of post holiday card bill guilt, you are not alone. While making good on
your resolution to pay down your debt is a terrific goal, you want to make sure
you do so in way that actually improves your overall financial status. In other
words, think twice before resorting to these sketchy debt pay-off plans.
Americans are loaded with credit
card debt. The average American household with at least one credit card has
nearly $15,950 in credit card debt in 2012, according to credit cards.com, and
the average interest runs in the mid- to high teens at any given time. Teens
under the age of 18 cannot apply for a credit card without a parent’s
co-signature, but according to school loan provider, Nellie Mae, more than 54
percent of college freshmen carry a credit card. Nellie Mae also reports that
on average, freshmen bring an average of $1,585 in credit card debt to college.
Teens credit card statistics
issued by the jumpstart coalition for personal financial literacy shows that one
out of three high school seniors use credit cards. Half of these students have
credit cards in their own names.
Credit Card Debt Statistics in America
Statistic Verification
|
Source: Federal
Reserve, Joint Economic Committee, Sallie Mae, Trans Union
|
Date Verified:
7.24.2012
|
Credit Card Debt Statistics
|
Data
|
Total U.S. credit card
debt
|
$793.1 Billion
|
Average credit card
debt per household
|
$15,799
|
Average household debt
|
$54,000
|
Percent of consumers
that carried an unpaid balance in the past 12 months
|
56%
|
Percent who said their
debt had gotten "higher" in the past 12 months
|
26%
|
The average balance
per open credit card
|
$1,157
|
Percent of disposable
income that went to service credit card debt
|
13.9%
|
Percent of families
whose debt exceeds 40% of their income
|
14.7%
|
Average credit card
debt carried by undergraduate college students
|
$3,173
|
Alaska has the highest
average cardholder debt of
|
$7,827
|
Percent of cardholders
whose balance is less than $1,000
|
40%
|
Percent of cardholders
whose balance is above $10,000
|
15%
|
Average combined
credit card limit per consumer
|
$19,000
|
Average debt of a
college graduate
|
$20,000
|
Percent of 18 to 24
year-olds who have "debt hardships"
|
20%
|
Percent of survey who
believe they had the same or less debt than the average
|
90%
|
Miami has the highest
percent of yearly income owed to credit debt
|
22.61%
|
Percent of college
students who have credit cards
|
76%
|
5 ways not to
pay off credit card debt
1. Dipping into retirement savings
This is when you tap retirement funds
that don’t serve their long- time interest. In this case, you are paying
yourself interest instead of the card company which seems like a great idea,
but as long as your loan is there, you are losing out on the compound interest
you could be earning.”The other unwise decision is to withdraw from your
individual retirement account. The 10% penalty alone can end up costing more
than any credit card interest.
2. Taking out a payday loan
Payday loans are essentially very high-interest
loans that provide an advance on your paycheck.”After you pay the fees and
interest rate, you will pay more than you would have if you just continued to
pay the card off,” Long says. The better move is to make adjustment to your pay
check. There are ways to alter how much income tax you pay on a short term
basis.” says Paula Ryan, The author of “Bounce Back from Bankruptcy.” This will
give you more disposable income to put toward paying off those holiday bills
quickly.” In a similar vein, if you expect a tax refund, you could file your
return early so you can get the money to pay off bills faster.
3. Paying off your cards without a plan
If you owe a balance on more than one
account, choosing an amount each month and divvying it up equally among
accounts is not advisable, Gahler says. The same goes for paying just the
minimum amount due on your accounts.”It will be hard to get out of debt for the
long term that way, ”he says. The better move is to focus on the card with the
highest interest rate first.
“Prioritize based on interest rate”,
Gahler says.”If you have got multiple lines of credit, focus on the highest
interest rate first.” The idea is to pay as much as you can afford on that account,
While maintaining on-time minimum payments on the others. The exception :”If
you have a small balance that is easy to just pay off, sometimes even if the
rate is lower, It’s a nice little victory to say, ”I have got card paid off,”
Gahler says.
4. Transferring balances
Using balance transfers can be an effective
way to pay off a debt using a lower rate card. The danger lies in the limited
grace period. People often end up using new card for additional spending
without paying off the original balance before the introductory period
expires.” Not only do they transfer the old balances, but they accrue even
more, ”Long says. Gahler also added that with every new account you open, your
credit score will take a temporary hit.
The better move is to use transfers
sparingly, and crunch the numbers first. Calculate exactly what it would cost
you each month to pay the zero interest debt before the zero interest period is
up,” says author Ryan. Then pay that amount each month so you get the use of
the credit card for free and get the debt paid off in full. ”Plus, most balance
transfer cards charge a 2% to 3% fee, so if you are transferring a hefty balance, you will be adding more to
your debt load.
5. Borrowing from family
Relatives are preferable to some other
lenders, but there are still caveats. Even if a family member offers you a loan
without interest, it can make for awkward encounters if you don’t pay it back
in a timely manner.
The better move is to save for the
holidays all year long. The holidays are going to come around again, so the
best way to plan ahead in your budget is to set aside some money each month to be
able to pay for holidays shopping,” Gahler says. That way, by the time next
December and January roll around, you have funds to pay for your purchases.
Ultimately, there isn’t a magic wand for
getting out of debt, it is really a matter of buckling down.”Stop using credit,
pick a fixed amount you can afford, and pay that amount or more every month
until the debt is gone.
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