- Credit cards are probably the main reason for so much consumer debt in the United States. According to TransUnion, one of the three major credit reporting agencies, the national average for credit card debt for the second quarter of 2008 was more than $1,600 per borrower. A report in MSN Money from July 2007 stated that the median balance on credit cards for households with this type of debt is $2,200. Experian, another major credit reporting agency, reported in 2008 that one in six families with credit card debt only pay the minimum amount each month, meaning it will probably take decades to pay off the total debt at that rate.
- The record-high consumer debt can be blamed on several major factors. Banks and lenders were offering very low interest rates to borrowers, even if they were not suitable risks for the loans. Credit card companies offered lower interest rates than normal, only to raise them once the borrower missed a payment deadline or went over their credit limit. Online shopping has also contributed to the high amounts of credit card debt, as credit cards are the most convenient way to buy over the Internet. Aggressive lending practices have also caused consumer debt to increase. Subprime mortgages and other types of loans were often given to home buyers with bad credit scores and unstable incomes.
- Filing bankruptcy was once an ideal way to erase your debts and get a fresh financial start. However, recent legislation has made it more difficult to file bankruptcy and get rid of your debts. According to the American Bankruptcy Institute, about 40,000 people filing for Chapter 7 bankruptcy will be denied each year. With Chapter 13, however, the rules are more lenient, because you are still required to pay creditors the money you owe through a strict financial program set up through the courts. Under Chapter 13, creditors can still foreclose on your property, garnish your wages and make you liquidate your assets. A bankruptcy stays on your credit report for 7 to 10 years, and on many job and mortgage applications, you must answer "Yes" if a question asks if you have ever filed bankruptcy, regardless of how long ago it happened.
- According to the listings on CreditCards.com, Chase is the largest issuer of general purpose credit cards based on outstanding balances in 2008. Chase credit card customers have an outstanding balance of $183.32 billion. Bank of America is a close second, with outstanding balances equaling $166.32 billion. Citi, American Express, Capital One, Discover and Wells Fargo round out the top seven on the list.
- Credit counseling is a major component of helping consumers reduce their debt and keep them from getting back into debt once they are out. Counselors also teach consumers how to spend their money better, resist purchases based on emotion and manage their money better so they do not end up in the same situation. One of the most popular credit counseling agencies is the National Foundation for Credit Counseling (NFCC). Others include The Association of Independent Consumer Credit Counseling Agency, Consolidated Credit and many more. With the number of credit counselors in the nation, you can find a credit counselor that fits your needs.
