The average consumer owed more than $4,200 in credit card debt at the end of 2010, according a report from Experian. Residents of San Antonio had the highest average credit card balance of $5,177, followed by $5,115 in Jacksonville, Fla., and $4,960 in Atlanta. The consumer credit reporting agency said many people may even still be feeling the squeeze from credit card purchases made during the holidays.
Too much credit card debt
Maxine Sweet, vice president for public education at Experian, said in a statement: “We want consumers to understand that spending at the holidays or at any other time of the year can often have broader implications to their overall fiscal fitness.
“By carrying over credit card balances and utilizing a significant portion of their available balance, they can potentially negatively affect their credit scores, which can in turn hurt them when it comes to applying for other types of credit down the line including mortgages and car loans. It’s important for consumers to get that debt under control before it has a lasting impact on their credit scores.”
Credit debt relief
If you are looking for credit debt relief from hard credit card balances, even small changes in your spending habits can help jump start a debt reduction plan. Adding extra money to the minimum payment for just one credit card can help you knock down that balance faster. Use any tax returns or bonuses to pay off credit card debt. Finally, it’s important to review your finances every few months to adjust spending so that it advances your debt reduction strategy.
The national credit card delinquency rate in the fourth quarter of 2010 was down nearly 32 percent from a year earlier, according to TransUnion. However, 32 states saw an increase in average credit card borrower debt from the previous quarter. The biggest gains in average credit card borrower debt occurred in the District of Columbia (4.17 percent), Iowa (2.84 percent) and Mississippi (2.7 percent).
The credit card delinquency rate measures the ratio of borrowers 90 or more days delinquent on one or more of their bank-issued credit cards.
According to Ezra Becker, vice president of research and consulting in TransUnion’s financial services business unit: “From a delinquency perspective, 2010 was an excellent year for consumers as they showed continuing fiscal responsibility in working to pay down their credit card debt. Even in the presence of falling home prices, the accumulation of negative real estate equity and high levels of unemployment, consumers still have been placing a premium on paying off their credit card obligations and maintaining the health of their card relationships.”
The national average credit card borrower debt, which is defined as the aggregate balance on all bank-issued credit cards for an individual borrower, dropped 8.62 percent from a year earlier. Alaska had the highest average credit card borrower debt at $7,010, followed by North Carolina ($5,680) and Tennessee ($5,605). Iowa had the lowest average credit card borrower debt at $3,915, followed by North Dakota ($4,181) and South Dakota ($4,248).
The Federal Reserve reports that although consumer debt levels are increasing, which indicates more consumer spending, credit card debt levels are falling. As of January 2011, consumer debt increased to $2.412 trillion, the fourth consecutive monthly increase. Credit card debt decreased by $4.2 billion or 6.4 percent during January. Although some of the decrease could reflect issuer charge offs or consumer bankruptcy filings, it’s also likely that consumers are learning the lesson that carrying high cost revolving debt is similar to being stuck on a high-speed hamster wheel. If you’re ready to free yourself from the cycle of incurring credit card debt and paying high interest and penalties, here are some tips for succesful debt management.
Managing credit card debt: no instant success
- Understand that debt doesn’t go away over night: Falling into a financial hole is easier than digging your way out. Your commitment to eliminating credit card debt is required for success.
- Establishing and writing down your goal: Review your credit card balances, make a list of them and set a goal for becoming debt free. It’s important to be realistic and plan your debt repayment schedule based on existing income. Don’t count on the lottery, your relatives or a windfall to bail you out of credit card debt.
- Apply all “found money” toward your debt: Tax refunds, raises, bonuses, funds from garage sales and online auctions can help you reduce your debt faster. That jar of change you’ve been saving for years? Take it to the bank and pay down your debt.
- Change your spending habits: Don’t carry credit cards in your wallet. If you have to consciously seek out a credit card before shopping, you may think twice about using it. You can use debit cards with major credit card logos anywhere that credit cards are accepted. Knowing your expenditures are coming out of your checking account can help you put the brakes on impulsive spending.
- Cooling off before buying: It’s not realistic to expect that you won’t engage in any discretionary spending, but try to enforce a “cooling off period” before purchasing items you want rather than need. Think about it overnight, review your debt management plan and ask yourself if $150 for a new pair of shoes would be better applied toward reducing credit card debt.
- Engaging the support of friends and family members can help you stay on track. Suggest alternative activities to recreational shopping and “girls day at the mall.”