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March 5th, 2010

Is Credit Card Debt Part of our National Identity?

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In a recent report, CBS News asserts that U.S. financial institutions have issued over 700 million credit cards, a number equivalent to more than two credit cards for every American.  As a nation, we carry approximately $775 billion in credit card debt. If you’re unwilling to accept credit card debt as a significant influence in your life, there’s some good news.

Debt Management 101: Using Your Debit Card

Many consumers are using their debit cards for routine purchases instead of whipping out their high cost credit cards for everything from gas to groceries. Carrying a debit card instead of credit cards can help you control spending, because you need to track your bank balance when you use your debit card. Carrying balances on credit card accounts leads to revolving debt, which results in paying finance charges. Using credit cards and carrying revolving debt on household expenses inadvertently increases your cost of living. Who wants to pay interest on a dozen eggs and a quart of milk?

A credit card for major purchases does offer an advantage over a debit card; debit cards do not come with the purchase protection programs offered by major credit card issuers. If you buy something with a debit card and it gets lost, damaged, or doesn’t work, you won’t have this protection. Reducing your dependence on credit cards while using them to your best advantage is tricky,  but important, if you’re making significant purchases and want the benefit of automatic consumer protection.

Consumers Getting a Clue: U.S. Credit Card Debt Falling

Faced with shrinking credit lines and escalating fees and interest rates, U.S. consumers lowered their credit card debt by an average of 8% last year. In contrast, advertised credit card rates increased from 11.5% last year to about 13.5% in 2010. Credit card issuers typically advertise their lowest rates, which are available to customers with excellent credit. If you’re carrying credit card debt with high annual percentage rates (APRs), prioritize paying off your highest cost debt first. Otherwise it can take you decades to pay off revolving balances if you’re only making minimum payments. Dipping into liquid savings to reduce high cost debt makes sense when you compare the APR you earn on savings with the APR you’re paying on credit card debt. You can find an APR for a credit card on the monthly statement.

Credit Counseling, Debt Consolidation Useful for Eliminating Credit Card Debt

Consumer credit counseling and debt consolidation programs  can help you consolidate debt, lower monthly payments, and eliminate credit card debt through negotiations with your creditors. Credit counseling can also help you formulate a cash-based budget and handles communications with your creditors once you’ve signed up for a debt consolidation and repayment plan.

Eliminating high cost credit card debt is a first step toward financial freedom and a comprehensive financial “makeover.” Being free of consumer debt helps you increase your savings and achieve your financial and personal goals.

Post written by Karen Lawson

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  • Chris Rocks is the Regional Director of the National Credit Federation (NCF). NCF is a nationwide membership-based organization that assists consumers recovering from a financial difficulty and those who need a significant increase in their credit score. Chris began his financial services career as a Financial Advisor helping young families with risk management and asset accumulation strategies. It was during that time that Chris realized that many of these young families also needed someone to guide their choices with regards to debt management. He made the transition into the mortgage industry where he first worked as a loan originator and later the Vice President of a small mortgage company. As Chris came across clients who had suffered through financial challenges and saw the difficulty they had in re-entering our credit driven economy, he discovered there was a real opportunity to leverage his unique background and help others. He can be contacted by visiting his personal site, GoodCreditLiving.com.

  • Francine L. Huff is the Publisher and Editorial Director of Super Savvy Publishing, LLC, which provides editorial and publishing services. She is a gifted author, freelance journalist, and motivational speaker who has entertained and motivated a variety of audiences through workshops, panels and keynote addresses. Francine is the author of The 25-Day Money Makeover for Women, which has inspired and motivated many readers to rein in poor financial habits, become good stewards over their money and work toward a debt-free life. She has appeared on a variety of TV and radio shows. Francine previously worked for the Wall Street Journal, where she was the spot news bureau chief, a news editor and a copy editor. She has interviewed a variety of financial professionals about financial issues and strives to present information about managing money in an easy-to-understand format that is accessible to people of all backgrounds and income levels.

  • Karen Lawson is a freelance writer with more than 15 years of experience working in mortgage banking and loan servicing. She holds BA and MA degrees in English from the University of Nevada, Reno. She enjoys writing informative articles about debt management and personal finance.

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