Understanding credit cards.
A credit card is a payment card issued by financial houses that allows the holder to pay for goods and services. Of course, this is based on the premise that the holder of the card will pay for them later, generally with interest. The idea of having something now and paying for it later is pretty enticing to many Americans, but also contributes to the outrageous credit card debt in the US.
Today, the use of credit cards remains the most common way of getting a loan in the United States. In fact, a survey carried out by Statista in June 2018 showed that 83% of American citizens between the age of 39 and 49 years own at least one credit card. This means that at least four out of five adult citizens of the US have, and use a Credit Card. If that isn’t enough, the average unsecured debt of a U.S. household in December of 2018 was $8,187.
The payment of debt incurred by a holder of a credit card is done with interest. According to WalletHub’s Credit Card Landscape Report, the average interest rate placed on a credit card is 19.24% for new offers and 14.14% for existing accounts. Not all credit companies give credit with the average interest rate. For instance, the Sears Credit card offers an interest rate of about 24%.
Who can get a credit card?
In most cases, getting a credit card does not pose that much of a problem. The fact that a lot of Americans have credit cards should be a good indicator of this. Even with mediocre credit, there’s likely some options for you. The problem that comes with the usage of credit cards is the deferred payment of the debt. If you are lucky enough to receive a credit card, the interest is likely quite high. Remember, an interest rate is the percentage of money the credit costs you. This is due to the fact that when credit card companies loan you money, they don’t have a lien or collateral on it. This is known as an unsecured debt. Credit Cards are the most widely used sources of unsecured debt in the Country.
Over the past six years, the credit card debt in America has grown by 9%. According to a report by Bloomberg, Credit card debt in the United States reached a record 870 billion dollars by the end of 2018. This report revealed that based on Federal Reserve data, credit card debt increased by 26 billion dollars. This made it the first time since 2008 that credit card debt reached such high levels.
What’s the future of unsecured debt? like credit cards?
The future of credit card debt relief looks bleak. While there is income growth which helps fight inflation, some things like medical costs, personal expenses, vehicle expenses, and cost of living continue to outpace income. This makes it difficult for debtors to repay their debts. Also, the interest to be paid on credit cards is very high. For instance, households that have revolving credit card debt would pay an average of about $1,200 in interest alone this year.
With the rate at which credit cards are continually being issued to consumers, it is very unlikely that this 870 billion dollars’ debt will be paid back anytime soon. Kimberly Palmer, a credit card expert has posited that “credit card debt is the stain on millions of America’s finances that doesn’t scrub off easily, if ever”.
There are options
For consumers with unsecured debt specifically, there are some good options out there for you. Debt settlement, debt consolidation, and debt management programs are all viable options with the new federal regulations in place for these companies. The great people over at Consumer First Financial would be a good place to start if you’re looking for a reduction on your credit card debt, and a quick path to payoff.