It's easier than ever to obtain a credit card. American's have difficulty saying "no," when it comes to credit card offers. As of 2016, the average debt is quite high. The national average for credit card debt, according to the Federal Reserve, is $935.6 billion. This roughly equates to an average debt, per person between the ages of 18 and 65, of $4,717.00. The overall total national average is higher than it has been since 2011, but far less than it was in 2008.
Because credit is offered so easily, most card holders don't pay off their entire balance each month. Only 35% of users do. For those who don't, they rely upon limit increases. However, this just invites card members to spend more, which exacerbates the problem by increasing the consumer's debt. With typical interest rates at 15 percent or higher, it's no wonder credit card debt is difficult to pay off.
What can you do to reduce your debt?
Create a budget: Creating a budget will let you see what your total monthly income and expenses are. It will help you visualize everything spent each month from groceries and childcare to entertainment. It will even help you see the miscellaneous items that slowly creep on you one dollar at a time. Knowing what your expenses are, you will be able to determine which items can be scaled back or eliminated to cut your overall costs. By reducing costs, you will be able to make more than the minimum payments on your credit card bills.
What can be reduced: Changing phone plans to lower data usage or eliminating your cable or satellite bill will significantly reduce monthly expenditures. Additionally, you can lower utility bills by making sure everyone in the household unplugs anything not in use and remembers to shut the lights off.
Penny Pinch: Once you can see what purchases accumulate in smaller increments, determining whether or not that Starbucks or Caribou coffee is really necessary will be easier. Making coffee at home will reduce overall expenses. Look for other items, such as gum, candy or dollar bin purchases, that can be reduced or eliminated as well.
Additionally, reducing the amount of times you eat out, go to happy hour or frequent the theater will help cut down some of your expenses. Making meals at home will typically be cheaper than dining at a restaurant and Netflix is cheaper than going to the theater. Remember, these are all temporary changes. Once you have met your goal and have eliminated your debt, you can slowly add back some services or activities.
What if I can't pay off the credit card debt?
Debts can certainly mount up from different life situations, especially for those who have experienced divorce or have major medical bills. In the event your credit card and other debts have completely overwhelmed you, there are other options. Bankruptcy is one of them.
Speaking with an attorney who is experienced with bankruptcy law can answer any questions you have about the process, as well as provide information about how you can bounce back and how to handle the possibility of disputing information on your credit report later.