Just how bad is it?
According to The Balance; the average credit card debt of a U.S household in December 2018 was $8,187 which means a total of $1.045 trillion. This clearly depicts how common and serious a problem credit card debt is, especially when it comes to having financial freedom. With an outstanding debt, you are not as free to make financial decisions as a significant chunk of your income goes to paying existing debts. So if you want to know the most common debt causing factors, have a look at the list below:
Medical Expenses:
The fees of doctors alone can be pretty hefty. Then, you need to purchase costly medicines that further the cost. But, the more significant debt causing problem occurs when someone goes through a major procedure like surgery. Often, the full costs of these procedures are not be covered by your insurance, forcing many consumer to use credit cards.
Overspending:
The most common cause of debt is overspending, or spending money on things you might not even need (impulse buying). You may not notice that you are recklessly spending money when you are leveraging the benefits of a credit card, but when one day you look at your finances, you notice the massive debt accumulated over time.
Inflation:
The cost of living rises every year on things like housing, gas, food and so on. This one may not directly be your own fault, but if you track your expenses, you will not fall victim to the debt due to inflation.
Employment Loss:
Another very common reason that makes one fall into the pit of debt pretty quickly. If your unemployment duration is long enough, you will burn all your savings and will rely on your credit card for daily expenses. This is an all too common scenario in the US currently.
No Debt Management:
Some people just refuse to look at their accumulating credit card debt, and instead keep on spending. Eventually, their credit card sticks out its tongue saying “you have reached your card limit.” Don’t stick your head in the sand like an ostrich; work on your debt management.
Keeping up with the Joneses:
This is the problem of every other individual who seeks appreciation from society. They will buy houses, cars, jewelry or other expensive things just to maintain a ‘standard’ in society, not realizing they are going deeper into debt.
College Expenses:
According to Student Loan Hero; there is a total of $1.56 trillion student loan debt in the U.S. This stat says a lot about the commonness of student loan debt. Granted, the study is crucial for your career, but if you work on debt management from day one of college, you might get out on time and spend your life debt free… might.
Lack of Financial Literacy:
People who simply do not have any financial education or experience in making good financial decisions may end up solely relying on their credit cards. They may make bad investments and ultimately find themselves under the heavy rock of debt.
Expanding the Family:
Many couples who are struggling financially decide to expand their family. And when they do, they realize that the hospital expenses of childbirth, daily expenses of the child and daycare can cost a lot in the long run. This also results in increasing debt and a credit card seems like an easy way to handle it.
No Insurance:
Another major cause of debt is not having insurance, especially health insurance. Many people struggle financially when an emergency happens, and if there is no insurance in place, they might have to use their credit cards.
So these are the most common and overlooked reasons for debt that result in people taking more credit card help instead of working on debt management. If you are also struggling with debt, a good debt management company might help you get out quickly.
