Despite the news that consumers are getting smarter when it comes to credit card use, it is still a force to be reckoned with in terms of financial difficulties. Even if employment rate is high and you are more confident that your job will not go away, you have to be very careful when it comes to accumulating this type of debt.
Credit cards remain to be in the top three debt list in the country. At the time of writing this article, the US Debt Clock website shows that we have a total of $851,136,580,223 in credit card debt. Before that sentence was finished, the debt rose to $851,136,586,343. We’re pretty sure if you visit the site the numbers would have changed again.
Regardless of what the government may be saying about the economy, we need to do something about credit card debt. This debt is not like the other two debts on the top three list – which is mortgage and student debt. Both of them, while they have alarming figures, have the potential to be good debts because they contribute to your personal growth, specifically your personal net worth and ability to earn more. Unfortunately, the same cannot be said for credit cards.
Effects of credit debt
1. Credit cards encourage bad financial habits
The primary reason why these plastic cards are bad is because it encourages bad financial habits. First of all, it allows you to purchase things even if you cannot afford to pay for it in cash. That keeps you from living within your means. You are being taught to rely on a future income that has all the possibilities of not arriving. And if that happens, where does that leave your future self? Buried deep in debt.
Cards also make it very hard to make smart spending choices. If you try to buy in cash, you will notice how difficult it is to pay for your purchase if you are literally giving money away. That is not felt when you are swiping your cards because no money is exchanged. You feel the effects of the purchase when the billing statement comes in and by then, it would have been too late.
2. Debt restricts your personal growth
Another reason why credit card debt is bad for your future is the fact that it restricts your personal growth. Think about it for a second.
Any money that you send towards card payments, if you don’t pay for it within the grace period, is already imposed with interest. That is how credit card companies profit from your debt. Credit cards are notorious for their high interest charges and that is a complete waste of your money. Instead of savings that amount or investing it, you are just making your creditors rich.
And if you fail to make payments, your rising debt amount and the late payments will reflect badly on your credit score. Having a botched credit report will make it hard for you to get a good deal when you are trying to borrow money to buy a home or start your own business.
3. Credit debt affects your relationships
Lastly, any debt in general can put a strain in your relationship – especially for unmarried couples. A survey conducted by the National Foundation for Credit Counseling stated how 70% of adult respondents are not comfortable discussing money with their partners (source: CNN Money). This could lead to a lot of secret affairs with credit cards that could blow up in the face of the couple when it starts putting a strain on the household budget.
Debt and divorce are oftentimes linked because money problems ignite terrible fights in couples. It is either the debt amount or the restricted budget that will start a fight and this can all be avoided if you only put a tight lid on unnecessary spending – especially with credit cards.
You should also consider what you will be putting your children through. Instead of saving up for their college education, they will be force to rack up student loans because you had to put your extra money into debt payments. And think about the things that you cannot buy for your children. While you do not want to spoil them, it is still very difficult to say no to something that they really want to have.
What to do with credit card debt
Thankfully, there are many options to deal with credit card debt. You do not have to sit in a corner and wait for your creditors to start taking your things.
One of the best options for credit card debt relief is debt settlement. The goal of this debt solution includes:
Debt reduction. You will try to convince them that you are in a financial crisis so they will allow you to pay only a portion of your debt.
Debt freedom in 2-4 years. Most debt settlement programs only take 24-48 months to complete.
Peace and quiet without collection calls. This is true if you hire a debt negotiator because part of their service involves taking over creditor communications.
Of course, you need to be aware that debt settlement involves defaulting on payments to help convince the creditor that you are in a financial crisis. That means your credit score will go down – but you can be assured that it will not be as damaging as bankruptcy.
It pays to know your options. Explore how you can be free from credit card debt and you should be able to secure your future and keep it from being a miserable life.