Credit card debt can be nearly insurmountable if you fail to
keep an eye on it.
A topic we have covered extensively is the topic of credit card
debt. And for good reason - most Americans have tons of it from
the nineteen debit and credit cards they carry in their wallet
or purse. Credit cards are great tools, and it's useful to have
them, but they represent a tremendous opportunity to fall into a
deep hole that could easily lead to financial ruin.
The relatively high interest rates and the relatively low
minimum payments make it easy to spend more money than you have
available. In this two part article, we will outline the top ten
reasons why people spend more money than they should with their
credit cards.
1. Poor management of their money. This one seems obvious; you
absolutely must keep tabs on how much you spend each and every
month. Your Visa card with a $30,000 limit is not doesn't mean
you can max it out if you only earn $20,000 per year. A little
prudent thought needs to come into play. How much discretionary
income do you have left after you pay your rent, car payment,
grocery and utility bills? That number is the maximum you can
afford to spend on your credit card. If you spend more than
that, you're going to have a deficit. And at 20% or more per
year, that can add up.
2. Lowered income. The last five years have been difficult for a
lot of Americans as jobs have been outsourced and companies have
reorganized. Many people are working longer hours for less pay.
Some jobs, like computer administration, pay a fraction of the
salary they did in the late 1990's. If you are in a situation
where you are still working but earning less than before, you
have to acknowledge that the amount you have to spend has been
reduced, as well. A cut in salary necessarily means a cut in
spending. And that is that.
3. Divorce. What used to be a single household with two
paychecks may suddenly become two households with one paycheck
each in time of divorce. Suddenly, all expenses are up and you
may not have enough money to cover all of the immediate needs if
you have to find a new apartment and put down deposits for
phone, electricity and gas. With nearly half of all American
marriages ending in divorce, this problem becomes a real one for
many people who weren't expecting it.
4. Failure to save. Americans are saving at the lowest rate in
history. The inability to put money away for later means that
more and more people are turning to their Mastercard when an
emergency strikes. The wise consumer will try to put away a
small amount of money from each paycheck so that a nest egg will
be available in case of emergency. It's far better to reach into
your bank account when the car breaks down than it is to throw a
$2000 transmission on your Discover card.