Credit card debt is on the rise. NBC News recently reported that consumers racked up $28.2 billion in credit card debt from April to June in 2014, creating the largest debt buildup since the before the recession started in 2008. The average household credit card debt rose from the first quarter of 2014 to the second quarter — and that’s before the biggest retail spending season of the year, according to the NBC report.
Credit cards can be attractive for holiday shoppers because they can buy higher-priced items and spread the payments out instead of plunking down all of that cash for the latest iPhone, video game console, or big-screen TV all at once. However, using credit means that consumers pay more for their purchases in the long term because of the interest tacked on to their credit card balances.
Those credit card balances come at the same time as higher winter heating bills that put pressure on the budgets of many Americans, and when many families already live paycheck to paycheck, going into debt for the holidays can be the straw that breaks the camel’s back. The Association of Independent Consumer Credit Counseling Agencies reports that its member agencies see a surge of consumers seeking help with debt management during January and February — usually driven by holiday spending.
How Much Do People Rely on Credit Cards?
Website Debt.org provides statistics on credit card use, and shows that:
- Upwards of 160 million Americans have credit cards
- The average person with credit cards has three or more cards
- The average household with credit cards has about $15,000 in credit card debt
Having a credit card isn’t bad as long as you use credit wisely and responsibly. Having a credit card and paying your balance in a timely fashion can help you maintain your credit rating and get better interest rates when you want to finance a new car or get a mortgage to buy a house. The key is to know your limits and what you can afford.
6 Tips from the CFPB to Keep Your Spending in Check
When it comes to holiday shopping, the Consumer Financial Protection Bureau offers these tips for keeping your spending in check:
Plan your shopping and do price comparisons between stores to make sure you get the best deals on the items you want
Make a list of the people for whom you are buying gifts and what you want to get them
Set a budget for spending and know how much you can afford to spend
Once you buy all the items on your gift list, stop shopping and avoid impulse buys
Write down everything that you spend on holiday gifts
Avoid using credit cards for your holiday shopping whenever possible
If you follow these tips, you may be able to avoid getting underwater with holiday debt. However, if you’re already in debt and feeling overwhelmed, there are several options you can explore.
Drowning in Debt?
- If you don’t have a household budget, prepare one and stick to it. Trim your expenses where you can, such as dropping cable TV or carpooling to work to save on gas.
- If you’re not behind on payments, you may be able to consolidate your debt or transfer your balance to another card with a lower interest rate to make your payments more manageable.
- You may be able to get help from a consumer credit counseling agency, which can negotiate with your creditors to get your payments to a level that’s affordable for you.
- If you’ve fallen behind and are in collections or facing repossession, eviction, foreclosure, or utility shut-offs as you try to juggle your monthly expenses, you may want to consider talking to a consumer bankruptcy attorney about whether bankruptcy is the right option for you.