Consumer Spending Can Be Bad News in a Growing Economy
There appears to be a tendency among American consumers to ignore the problems that credit cards can create if used unwisely, even irresponsibly. The level of credit card debt is truly disturbing especially when considering that the recession, caused in many ways by widespread complacency over credit, is still a lingering factor. Certainly the US Economy has needed consumer spending to get things moving forward but once again it seems that much of the spending has been on credit. The average card debt of those not paying off the total on their monthly statements is in excess of $15,000 and the interest rate applied to that debt ranges from a low of around 15% to a high of 20%. What a waste of money that is and an indicator that personal financial management is sadly lacking in American society.
It appears that over 130,000 million citizens have at least one card and those carrying debt actually appear to pay 20% more than they would have needed to for any one purchase than if they had paid cash. The extra is the interest that accumulates until the purchase is paid off in full. Those only paying the minimum each month seem to disregard the fact that their balances hardly fall when interest is then applied. It would take years to pay off any balance even if there were no more transactions on the card.
While 0% balance transfer deals still exist they are not as widespread as in the years before recession when consumers were able to move balances around to avoid interest because the card companies were adopting an aggressive policy of seeking more clients without too much regard for their creditworthiness. The opportunities to do that now are far more limited so the point will always come when there is nowhere else to go and the balance has to be addressed.
For those in work with a regular pay check that can be taking out a personal loan at a much lower interest rate and paying off the balance. Such loans then charge monthly installments of equal amounts for the full term of the loan until the debt has gone. It is a budgetary exercise that should be common sense but too few Americans seem either aware of or prepared to take that course of action.
The problem of card debt is not helped by the fact that card holders seem to use cards for even the smallest purchases. If they carried more cash taken from their checking account and not from an ATM on their credit card that would still to instill a little self-discipline perhaps? Those who are overspending are effectively using their cards to boost their monthly income by ignoring the fact that their household expenditure is actually exceeding their income with the card supporting their daily lives.
If people were to argue that they only have a credit card for convenience then surely a debit card offers similar convenience only there must be money in the account or it will be rejected?
The Credit Card industry is very competitive and it is certainly worth looking at the best available deals; rewards, promotions and interest rate to be applied. It makes sense to take a 0% balance transfer offer but to be fully aware of how long it will be before the introductory promotion period finishes and the standard rate of interest will then be applied each month to any balance. That at least provides some breathing space to get a strategy in place to address debt.
The strategy should revolve around a proper budget that identifies what comes into the house each month and what is going out. The obvious aim is to create a surplus that can be used positively towards the future, and not just then spent because it is a surplus. There may be some savings that can be made from the expenditure column. Typically regular bills for insurance, utilities and telephone network can be targets for cheaper providers. There are comparative websites that do much of the groundwork. Make the time to try to improve your level of debt and certainly investigate every means of avoiding expensive credit card costs with a personal loan clearly a good option.