The Growing Problem of Credit Card Debt

One of the most serious financial problems facing Americans today is the issue of credit card debt. The concept of credit is nothing new, merchants in the late 1800's in America were exchanging goods and services for currency known as credit coins or charge plates - essentially a promise to pay for the goods or service in the future.

The first plastic credit card was created by American Express in 1957 and over the last 50 years, the use of credit cards has become increasingly common. Today, the average American has 9 credit cards showing on their credit report, and the average consumer has four credit cards in their wallet. Even if the credit accounts aren't all open at once, most Americans are all too familiar with swiping the card to pay for life's expenses.

Consider these alarming statistics:

• Total consumer debt in the US not including mortgage loans is $2.46 Trillion. Of this total, over $900 billion is credit card debt.
• One in six credit card holders pays only the minimum payment every month.
• Since 2002, the rate at which cardholders pay down balances has decreased annually.
• For the first time in US history, the American savings rate is negative.

There are several factors contributing to the growing problem of credit card debt. Since the early 1980's, banks and other issuers of credit have bombarded mailboxes with tantalizing offers for credit. Citing low interest rates, pre-approved credit, and a promise to have a card in your mailbox within just 2-3 business days, it's easier for Americans to get their hands on credit cards than ever before.

College students walk past booths on campuses offering free t-shirts, gym bags, or beach towels in exchange for signing up for a new credit card. Department stores offer discounts to shoppers who use company specific credit cards. And with the growth of technology, consumers can shop from home with a credit card, having items delivered to their doorsteps without ever setting foot in a store.

We all know people burdened with excessive credit card debt and have heard the stories of how the problem grew little by little until it was too much to overcome.

What are the risks of high levels of credit card debt?

First, revolving credit is notorious for charging high interest rates, and card companies are known to increase rates without warning. Many cards often charge annual fees, not to mention unreasonable late fees if payments aren't made in a timely manner. The minimum monthly payments associated with most credit balances are so low that cardholders paying only the minimum are just digging deeper into debt.

Credit scores suffer with credit card debt, leading to difficulty in qualifying for loans. Often, excessive credit card debt spirals into bankruptcy.

The key to stopping credit card debt is to stop adding to your balance. Consider options like reducing your interest rate by consolidating your debt. Most importantly, control your use of credit so that your credit card debt can't control you.