Credit card debt is a way of life for Americans: Why so?

Credit card debt is a way of life for Americans: Why so?

“Credit card debt is a way of life for people in America” This statement is true.
According to the survey conducted by the CreditCards.com, 39 million credit card holders are carrying a balance from the year 2017. Well, this is the cruel gift of having credit cards. Because most of the people don’t manage their credit cards properly.

It is true that credit cards are the most convenient tools for purchasing items. People are using their credit cards to buy daily necessities. They also use credit cards to purchase things that they can’t afford in cash. Whereas, the credit cards should be used for emergency purposes or for buying an expensive item.
Though this statement is not fully justified. Because, if a person manages the credit card properly, then the card can be used for buying necessities and expensive items too.
Credit cards are convenient for buying daily goods as carrying cash can be dangerous and using a debit card is not secured.
But more important is repaying the credit card bill in full and on time, which most people don’t do and fall into credit card debt easily.

According to the survey of wallethub, the average credit card debt in America is $1.03 trillion. 6 in 10 young people in America have admitted that they make frivolous purchases with their credit cards and this would be the reason for their debt.
On the other hand, nearly 2/3 of Americans who are in debt, have said that they racked up debts to manage emergency expenses like car repairs or medical bills.

The survey also showed us some facts: “People are now more easy with their debt.”
As per the survey, 43% of people have said that credit card debt feels normal. Though, 46% of people have agreed that their credit card debt makes them feel stressed.

So, now, this is also true that for most of the people in America, credit card debt is a way of life.

Why are people getting trapped into the credit card debt?

Surprisingly, some people said that they never missed any payment, but still they are in credit card debt. They said that they know it will take years to finish paying down the debt. Why so?

Making only the minimum payments

Most of the people are making the minimum payments on their credit cards. But making only the minimum payments on your card is not enough. Because minimum payments make just a dent in the principal of the debt. You must repay the total balance with interest to the company. Carrying a balance means you will be in debt for a long time while racking up huge amount of interest.

Getting attracted to the credit card rewards

Remember, credit card rewards are marketing gimmicks. The credit card companies are trying to entice people by offering reward points or miles. But, these marketing tactics are actually forcing you to spend more (Paying 18% more to get 25% back in reward). Instead of spending more credit to get the rewards, you should concentrate on getting the reward for paying the bill in full.

How to avoid credit card debt

Here are some ways to avoid credit card debt to live a peaceful financial life.

Get a credit card with a lower interest rate

Don’t sign up for a credit card with a higher interest rate for some mere privileges like discounts, rewards, and mile. Also, some people signup for a balance transfer card. Make sure you get the card that doesn’t charge a transfer fee.
Usually, the balance transfer card offers 0% APR for the first 15-21 months (Introductory offer) with no annual fee and a low or zero balance transfer fee. Here you need to move the balance to this card to repay the debts easily. However, you should try to repay the balance within the offer period. Otherwise, the interest rate will be added up and you may end up paying even more.

Avoid using credit cards randomly

It is true that credit cards are safe as you can move cashless. But it is also true that it doesn’t let you feel that you are running out of affordability. Remember, you shouldn’t use a credit card to buy whatever you want. Because credit cards are not free money. Use a credit card to buy things when you are sure about your affordability. In short, don’t buy things with a card that you can’t afford with cash.

Build an emergency fund

Some emergencies can force you to use credit cards. In most cases, people don’t repay the bill in full and fall into the debt cycle. Thus, you have to build an emergency fund to avoid using credit cards all of a sudden. Try to build 3-9 months worth of savings in an emergency fund to manage emergencies like sudden illness, accident, job loss, and natural calamity.

Lastly, though it is true that accumulating credit card debt is becoming our habit. But you can still stay away from this debt by living life with less. If you practice frugal living, you can easily avoid the enticing living style that most of the people are living now.