New financial statistics, released in early July by Georgetown University, reveals what consumers should be asking themselves about their credit card spending habits. They’re tough questions, too; but can lead to a stronger credit history, better credit card management skills and eventually, more money in the bank. The first hurdle is understanding what the statistics mean and then finding a solution if you find yourself against the wall. This week, we take a look at both – the problem and the solutions. Here’s a bit of what the experts are saying:
Facts and Stats
Perhaps the most alarming facts include those that say we are at an all time debit high when it comes to using our plastic to pay our bills. It’s true, more Americans are charging utility payments, groceries and even their car payments on the high interest credit cards. This can quickly result in even bigger problems than a late water bill. This also means fewer of us have savings to fall back on, since that would obviously be the first choice for many facing a bill without the cash to pay it.
The report says a record number of Americans are living paycheck to paycheck, further complicating their efforts. And all too often, consumers are simply applying for multiple cards and are approved, allowing them to simply shift their debt while buying another thirty days. Worse, they’re not even taking advantage of a 0% APR introductory credit card and in fact, many are taking on a higher interest rate.
Irresponsible Credit Card Lending
The report also says banks and the credit card industry as a whole continues their “irresponsible lending habits.” From extending credit limits on those accounts that are already maxed out to continued fees that are rapidly outpacing the balance due, credit card companies are still maintaining their profits. Couple this with overwhelmed consumers, and chaos ensues. In fact, the report made its way to Capital Hill in which many leaders began questioning and agreeing that credit card models are designed to “encourage unsustainable and irresponsible lending that leaves consumers buried in debt and hurts responsible creditors.”
And if you’re wondering what the credit card debt in the U.S. is, you might be disturbed to know it’s at $2.4 trillion – and growing every moment. Specifically, there is a $7,800 credit debt for every man, woman and child in the United States spread between 1.5 billion credit cards. That’s nine credit cards, on average, for every American who receives a credit card statement each month.
The Cracked Foundation
We’ve reported in the recent past that prepaid credit cards have seen a surge in popularity – and for good reason. It’s an ideal solution for consumers who are frustrated with ever-increasing fees, including late fees and over the limit fees. It provides the security of a credit card, along with the ability of shopping online and paying bills online, without the worries. It’s also a proven way to improve damaged credit scores. With unemployment numbers on the rise once again, this just be a permanent solution for many Americans.
On the Horizon
With so many changes in the credit card industry, it’s unclear the way the final images will emerge. It could be that rewards credit cards will be most popular only if they include intro 0% APR offers or it could be that prepaid debit and credit cards are the new way to go, even after the tough economic times have come full circle. Either way, the numbers revealed recently indicate that new laws, specifically the Credit Card Act of 2009, aren’t helping in the short term.
If you’ve found yourself struggling with your credit card payments, you’re encouraged to contact your credit card company. Visa, MasterCard and the other networks are willing to work with customers as they work through the tough times. You might discover solutions you weren’t even aware of and for someone who’s losing sleep at night, there’s no better peace of mind that to know a solution has been found.