Credit Card Debt

According to the Federal Reserve, 40% of American families spend more than they earn. This statistic comes as no surprise as the trend in American spending is to use a credit card if cash is not readily available. This spending habit often starts in college, carries into adulthood and leads many people with debt balances that are difficult to eliminate or even just reduce.

According to CardWeb.com, one of the leading online publishers of credit card information, the average interest rate is around 16%. This causes many consumers as well as small business owners to pay a lot more than they originally spent. Understanding how your interest rate effects your payments and how to manage your debt successfully is an important step on the road to financial independence.

Below are some tips on how to successfully manage your debt:

• Stop running up balances: The idea seems simple enough, but a difficult task for many people. One way to do it; keep one credit card for emergencies only and get rid of all the rest.
• Make sure you have the lowest interest rate possible: If you have multiple cards, read the fine print on your statement and make sure the one with the highest balance has the lowest interest rate. If this is not the case explore transferring balances to the one with the lowest rate.
• Pay more than the minimum: The more you pay every month the faster you will get out of debt and the less interest you will pay. According to Bankrate.com, paying only the minimum $60 payment on a $3,000 balance would take eight years to pay off and cost $2,780 in interest. By paying an additional $50 per month, the same debt amount could be paid off in three years and $1,800 could be saved in interest.
• Get professional help from a credit counselor: Check your local listing for credit card counseling services in your area.

Local Resources

• The Plain Dealer: Credit Card Debt Can Soar Beyond Limit
• WCPN: Young People in Debt
• Cleveland Saves: Build Wealth Not Debt
• Consumer Credit Counseling Services: Cleveland Office

National Resources

• NPR News: Credit Card Fees, Fees and more Fees
• Credit Card Industry: Facts and Personal Debt Statistics
• Credit Cards Drive up Small Business Debts

Support for MoneyWatch is made possible by Charter One Foundation. Research assistance for MoneyWatch is from Cleveland State University Nance College of Business Administration