Credit card debt is on the rise in the U.S.
In the past, taking on credit card debt was all about spreading large payments over a longer period of time.
Now, people are using it to pay for their groceries and other bills.
Basically, the way in which people use their cards has changed. If you can’t afford to make your credit card repayments any more, then you need to do something about it.
All about credit card debt
You are not alone when it comes to credit card debt. It is a massive problem in the United States right now, and it is only going to get worse.
Let’s talk a little bit about the extent of the credit card debt problem in the United States. We want to start by showing you this graph which highlights credit card debt as a percentage of a household’s total debt.
What can we learn from this graph?
Well, credit card debt has fallen over the years.
It is nowhere near the problem that we had in 1996. Somewhere around the financial crisis, things started to level out a little bit. However, things are starting to climb again. Basically, people are still willing to take on credit card debt.
This graph demonstrates the average amount of debt per household in America.
As you can see, there is barely any difference between households. You would expect a household with a higher net worth to have a substantially higher amount of credit card debt. However, it does not. It is roughly the same as the households with a lower level of income.
Perhaps one of the most startling things about this chart is that it demonstrates that the number of people delinquent on their credit cards has risen sharply over the years. The average debt per person has not changed all that much, it is the number of people who are struggling to meet their credit card repayments which has.
Basically, we have somewhat of an epidemic when it comes to credit card delinquency, and it is a problem which really needs to be dealt with quickly. The longer somebody is tackling credit card debt, the harder it is going to be to pull themselves out of that hole.
What happens when you miss payments on your credit card?
When you have credit card debt, it is not just a case of you owing somebody money. There are going to be some very real consequences related to having that debt, and these consequences can impact you for the rest of your life.
You need to deal with that debt as soon as possible.
The longer you leave it to deal with your debt, the worse things are going to become.
So what exactly are you going to have to deal with?
This is going to be the first thing that you need to deal with when it comes to credit card debt. If you miss a payment, just one payment, you are going to be charged a late fee.
The problem with this late fee is that, if you are in serious debt, there is the possibility that it will take you over your ‘credit limit’. If this happens, then your debt problem is going to get a whole lot worse. This is because there are many companies out there which charge people who go over their credit limit!
So, you end up with two fees.
Don’t forget, you are going to be paying interest on this!
Remember; if you go over your credit limit, then you are also going to have a higher repayment next month. This means that your debt is going to end up being a lot worse.
Basically, late payment fees are bad. Very bad. This is not the worst thing to come out of credit card debt, however.
Credit Score Goes Down
This give you a brief overview of what you will be able to ‘enjoy’ should your credit score start to plummet:
- You will find it difficult to secure credit in the future. This does not just apply to credit cards. It also applies to mortgages, car loans, and a whole lot more.
- If you can secure credit in the future, you will have exceedingly high interest rates. This means that you will be paying more back for the amount that you borrow.
- There are some jobs, namely those in the financial sector, which will not allow you to work there if you have a poor credit score.
Interest Rates Go Up
Many credit card providers out there will put your interest rates up if you continue to miss payments on your card. When your interest rates are higher, you will be paying more back for the credit card each month.
Remember; if you continue to miss payments, then the amount you need to pay back each month increases. It is common for this to result in debt spiraling out of control.
Finally, if you continue to miss payments on your credit card, then the credit card company will send you into collections.
Not only are they going to want all of your money back at once, they are going to want you to pay a fee for them collecting it from you too. If you are unable to work out an agreement while you are in collections, then you will be enjoying a trip to court where you will have a judgment made against you.
What can you do if you can’t pay for your credit card debt?
If you are struggling to pay back your credit card debt, then the first thing you are going to need to do is get in touch with your credit card company. You are going to need to negotiate with them.
We recommend that you read this guide to credit card debt negotiation.
It will really help you out.
There are a few purposes to negotiating your debt:
- Try to get the date that you need to pay back extended. Tell the credit card company the exact date that you are going to be able to pay the money that you owe. Make sure you commit to it. If you feel like you struggling to pay back your credit card debt is going to be a regular thing, then tell the company, particularly if there is a certain time you will be able to pay it back each month.
- See if you can change the amount that you need to pay back.
- If you are really struggling with your debt but have yet to hit the credit limit of your card, then you may want to ask the credit card company if they are able to lower the credit limit for you. It will make things a lot easier.
It is important that you make it a priority to pay back your credit card debt.
Generally speaking, you have thirty days to make a payment that you have missed.
If you miss the payment by more than thirty days, this is when you are going to get a mark on your credit score. You never want to let it get to that point.
Adjust Your Spending Habits
If you find that you are regularly missing payments, then you are going to want to start to adjust your spending habits. A good guide to budgeting can be found at the Forbes website.
However, we are going to give you a few tips here:
- Make a note of all your incoming money and outgoing money. Make this list as extensive as possible. The more on the list, the better! You do not want to miss anything. This includes entertainment expenses and the like.
- Look through the list and determine what you do not need to pay for. For example; there are people who may find that they are spending a lot of money on gym memberships each month, but they are not even going to the gym. Others may want to cut down on their television packages. For example; if you have sport packages and you do not watch sport, what is the point of paying for it?
- Determine areas where you can cut down on your expenditure. For example; if you are spending money on coffee each day, then you may be able to cut that out. Cutting just a couple of cups of coffee out each month should be enough to cover your credit card debt.
Remember; you are probably not going to need to take too much of your expenditure each month in order to meet your credit card debts. However, do try to cut everything down as much as possible.
The more that you are able to cut from your expenditure each month, the easier you are going to be making life. After all; it is likely that you will not just be dealing with credit card debt each month.
Debt Relief Company
If the other options are not suitable for you, or you find that your debts are spiraling out of control, then you may want to get in touch with a debt relief company.
The purpose of a debt relief company is to consolidate all of your debts into an easy payment to make each month. There are several different advantages to this.
The advantages of a debt relief company are:
- You will have a single payment to make each month. Perhaps one of the biggest difficulties people have is the fact that it is hard to keep track of everything that they are paying back each month. Working with a debt relief company does make things a whole lot easier.
- The money that you pay out each month is going to be reduced. Working with a debt relief company is probably one of the best ways to get your finances ‘back on track’.
- If you keep up repayments to your debt relief company, and we can’t stress just how important it is that you do, then you will find that you will no longer be dealing with late payment fees and the like. You will also not be taking a hit to your credit score.
Basically, a debt relief company is going to be able to help you get your life back on track.
This is important!
Of course, nobody ever wants to get into debt. Sadly, things in life do not always go our way. We urge you not to panic.
If you put your mind to it, you will find that it is easier than you may have thought to get out of severe credit card debt.
However, it is important that you do act as soon as possible. We can’t stress this enough.
If you do not acknowledge your problems at the earliest possible time, then you will have a hit on your credit report. This is going to make your life a whole lot more difficult going into the future, which means that your issues are going to be a whole lot worse.