Tag Archive | Credit card debt

Credit Card Debt will rise to HOW MUCH in 2016??

Just about everyone is at the very least thinking about reducing their level of debt. It is no fun walking around from one day to the next, owing creditors thousands of dollars. And while not everyone will take action to reduce their consumer debt levels, the fact that people are becoming more informed about dealing with debt is most definitely a good thing. A recent study indicates that by the end of the year credit card debt here in the United States is going to rise to… wait for it… a stunning $55.billion. The study that revealed this new figure was conducted by CardHub and used information from the Fed’s preliminary G.19 consumer credit report.098303c025b64b3da866d55de5907528

According to this report, American consumers paid nearly $35 billion toward their credit card debt in just the first quarter of 2015. This represents a seven percent increase from the first quarters of 2013 and 2014. Some of this increase has been attributed to factors, like the reception of annual bonuses, New Year’s resolutions and people getting their tax returns. Whether or not these things contributed toward debt payments being so low at the beginning of 2015 has yet to be determined. The bottom line seems to be that there was just more debt to pay in 2014 than there had been previously.

Previous year’s studies have usually shown that the 1st quarter of the year regularly results in plenty of debt being paid off, only for that debt to raise back up over the remainder of the year. Going back as far as 2009, the first quarters of each year showed the average pay off level reaching $35.9 billion with the median amount being about $33.5 billion.

Back in 2009 American consumers paid off about $874 million in debt. By the time 2010 rolled around debt began to eclipse payment levels by about $2.5 billion. And when it got to be 20111, things got even uglier, with the level jumping 1,696 percent. The year 2012 saw things settling down by about $12 billion, but credit card use was still on the rise. Debt increased in 2013 by nearly $39 billion, and didn’t slow down in 2014. That year, debt increased by $57 billion. There is no doubt about it – credit card debt can increase so quickly that it is no wonder it gets out of control on a nationwide level. According to data provided by CardHub’s study, American consumers currently owe about $831.2 billion in consumer credit card debt, with the average per-household amount being $7,177.

As 2015 crept into the final quarter, the Fed’s G.19 report indicated that debt levels were continuing to rise. Revolving debt (think credit cards here) rose up to nearly $900 billion, and that after staying close to the $890 billion mark since the fourth quarter of the previous year. Credit card debt, however, was not the only type of debt to increase. The total amount of consumer debt – revolving debt, student loans, car loans, etc… – rose nearly $21 billion dollars in April of 2015. With that debt tallied in the complete number for total debt levels settles in at $3.384 TRILLION!

As much information as people have about the importance of avoiding getting into debt, it is almost shocking that debt levels continue to increase. But, with employment issues and salaries pretty much stagnating in recent years, it is understandable that many working class American consumers are simply relying on their credit cards and other forms of credit in order to just keep their heads above water each month.

Should You Use Retirement Funds to Pay Off Credit Card Debt?

It is not hard for credit card debt to get sky high and very difficult to deal with. A gas card here, that you use to pay for groceries and gasoline, along with a Visa and MasterCard to buy clothes, gifts and even day-to-day essentials, and before you know it you are in over your head. It is not difficult at all to find yourself staring at $10,000, $15,000 or even more than $20,000 in credit card debt if you’re not careful.  But with all your other bills to take care of as well, how can you pay off that much debt?

Some people choose to use their retirement funds to pay off large amounts of credit card debt. For example, someone with $15,000 in credit card debt may choose to dip into their 401(k) in order to pay off all the debt in one fell swoop. While it might feel good to get rid of all that debt, doing so via your retirement funding may not be the best option.credit card debt

When you withdraw money early from you retirement account, you have to pay penalty fees and additional taxes. Remember, retirement accounts are made up of money that has not yet been taxed. Because of this, you can expect to pay a pretty penny when you dip into this account before retirement. In fact, you’ll likely have to pay a 10 percent penalty when you get the money. If you were to completely close out a retirement account – say one that is worth roughly $15,000, you can expect to pay close to $3,000 before you even get the money.

There are other cons to taking out retirement money early too. You wind up losing compound interest that you built up on that money. Retirement accounts are designed to build up over time via compound interest. The longer you allow the money to compound, the faster it begins to grow. It would take nearly 12 years of your money growing at a rate of six percent for it to double. However, in less than 25 years that money would be worth four times as much as it is right now. When you raid your 401(k) to pay off credit card debt, you wind up robbing your future self of a heck of a lot of additional retirement cash.

If you have an orphaned 401(k) account (one from a previous job) and find yourself tempted to use it to pay off debts, you might want to roll it into a new account. You could choose to roll it into your new employer’s 401(k) account once you are allowed to. Or, you could put those funds into an IRA that will allow you hold onto your money and tax benefits, while keeping it in place for your retirement.

Before you think that we are telling you not to use retirement money to pay off credit card debt, we do have to address the fact that compound interest also applies to credit card debt. In your retirement account, compound interest works in your favor. On your credit cards, though, it is working against you. If you are only able to make the minimum payment on a credit card debt of $15,000, you may find yourself paying on that account until you retire, anyway.

To find out whether or not you should take money from your retirement fund to pay for huge debts, you should probably take time out of your schedule to speak with a financial professional who specializes in these types of issues. There are times when you may be best served by doing so, but you shouldn’t do so without understanding all of the pros and cons of the situation. We hope that this article has helped you to understand a few of the pros and cons you should be aware of prior to making any final decisions about your debt.

The Most Common Money Problems that Americans Face

money-problems_7-most-common-causes-of-divorceSome people say, “More money, more problems.” Many of us, however, would contend that having less than enough money is enough of a problem as it is, and would love the opportunity to have more cash at hand for taking care of expenses and making purchases. Regardless of just how much money you make every year, though, you can take a bit of solace in knowing that many of the most common money problems you face are also issues for your fellow Americans.
But just what are the most common financial problems that people in this country face on a regular basis? It turns out that there are quite a few. With brevity in mind, however, let’s take a look at the list of the most common offenders.
Money Problem #1 – Not Enough Saving Going On
Chances are that at some point or another someone has told you how important it is to save for a rainy day. The problem is, however, that more than a few rainy days have hit our national economy over the past few years, and most people are tapped out in the savings department. Add to this the fact that many people (especially millennials) are not saving much money at all and you get a recipe for financial ruin. While many people may not have the ability to save much, making your savings an ongoing priority is a must – whether you are talking about being prepared for retirement or just making it through that next, proverbial rainy day.
Money Problem #2 – Making it from one Pay Day to the Next
With the price of living getting higher and higher by the day, it is no wonder that so many people have a hard time stretching their funds from one pay period until the next one arrives. A lot of Americans end up “Robbing Peter to pay Paul” and get caught up in a never ending cycle of never quite getting through from one payday until the next one arrives. Putting together a realistic budget – one that you stick to religiously – is the only way to get out of this cycle. You may have to make a few sacrifices – tighten up the belt, so to say – but in the end following a budget will allow you to avoid this all-too-common financial problem that plagues millions of people in this country every day.
Money Problem #3 – Ever Increasing Debt
If there is one financial problem that we would all do well to eliminate it would be the ongoing accumulation of consumer debt. It’s so easy for people to get approved for credit cards these days and then to go hog wild. The short term good feelings that come from making some purchases that you really can’t afford soon become a thing of the past when the ongoing yoke of consumer debt continues to mount up. The first step to getting out of debt is to avoid accruing any new debt. This might mean locking up the credit cards or even getting rid of them entirely. Slowly but surely you can escape the pain of ongoing consumer debt, and you will be very happy that you went without those expensive lines of credit when you are free and clear.
There you have it – a list of some of the most common financial problems that Americans face on a regular basis. If you can take action to get even these three financial problems under control, you’ll begin to feel more in control and will ultimately have more freedom to live the lifestyle of your choosing.

The Topic No One Wants to Talk About: Credit Card Debt

People like to do all that they can to keep up appearances. Most folks go out of their way to keep their homes and even their vehicles looking good. We put energy and money into looking our best; either through wearing nice clothes, taking better care of our bodies or both. And who can deny that we all like to brag a bit about our families and careers when we meet someone new?sgiwoxtdkkilttb8ixhk

Any time we meet someone for the first time, the dreaded small talk will come up. You know, those conversations about the mundane aspects of life. Even during these types of conversations, we all like to put our best foot forward and to project the best image of our lives as possible. There is one subject, however, that people often avoid talking about as much as possible – credit card debt!
A recent poll indicates that Americans consider credit card debt to be the worst topic possible to discuss with people who they just met. Americans were asked in this poll to rate how likely they would be to talk on a certain topic with a total stranger. Poll participants were asked to rate each topic with a rating between very likely, somewhat likely, somewhat unlikely and very unlikely as their ultimate answers.

Eighty Five percent of poll responders said that they would either be somewhat unlikely or very unlikely to talk about credit card debt with a stranger, which makes this the lowest rated category on the poll.

To put this in perspective, people rated ‘Details about your love life at the second worst, with 84 percent and their work salaries at third worst, with about 80 percent. These are very personal topics, so it is apparent that people feel very embarrassed or put on the spot about credit card debt to place it as being worse to talk about than these hot button topics.
The poll indicated that younger Americans were a bit less embarrassed to talk about credit card debt than their older counterparts. But even with that in mind, 79 percent of Americans aged 18 to 24 stated that they would not be comfortable talking about credit card debt with a stranger.

Debt and Personal Failure

Why are people so afraid to talk about credit card debt? It is probably because many people view debt as being a symptom of personal failure. This is especially true in the years following the most recent financial recession. Americans do not like to admit that they are struggling with debt. If you are someone who finds it hard enough to pay the bills every month, how much harder is it to actually talk with someone about these types of struggles?

Before the most recent recession, credit card debt was not considered to be such an off-limits topic of discussion. Most people were used to living off of credit cards, and it didn’t seem like a serious issue. Today, however, things have certainly changed. People obviously find credit card debt to be a touchy, if not downright painful topic. This study really proves that the majority of us simply don’t want to discuss our credit card debt problems.

If we don’t feel like discussing credit card debt, then we at least need to take action about this embarrassing subject. More American consumers need to do what they can to stop using credit cards for every day purchases and to pay off their consumer debts sooner rather than later… It is a heck of a lot easier to talk about credit card debt when you don’t have any!