A recent study shows that more Americans are going into credit card debt now that the recession’s effects have abated.
With the holidays around the corner, many Americans are tempted to charge more than they can afford to pay back. Unfortunately, incurring credit card debt can often eventually lead to financial disaster, because of high interest rates charged by most card issuers. Although the number of Americans with this type of debt decreased significantly during the Great Recession, according to a recent report, credit card debt has come back with full force now that economic times have improved.
More carrying debt
Americans started to take on more debt in the last quarter of last year. At this time, the average amount of household debt increased 2.1 percent, the biggest increase since the recession began. However, experts found that this was no cause for alarm, since the increase was driven primarily by mortgages and car loans, indicating a more positive outlook on the economy and future.
Unfortunately, credit card debt, a more troublesome form of debt, also has grown since that time, according to a recent report by CardHub.com. During the first quarter of this year, Americans paid $32.5 billion towards their credit card debt. Unfortunately, by the time the second quarter came, they had charged up $28.2 billion in new credit card debts. This is the largest increase since the recession.
During the second quarter of 2014, the report indicates that the average amount of credit card debt for each household increased to $6,802 from $6,682. By the end of this year, experts expect the average household will have $7,000 in credit card debt.
Although these increases may seem trivial, economists worry that they indicate that many households are flirting with financial failure. When the recession began, the average household had about $8,400 in credit card debt. Soon after, many of these households found themselves unable to repay their debts. Since the average household debt is not far off from this figure, some worry that many households will soon reach their financial breaking points.
Since the average American household charges $730 for gifts and other items during the holiday season, financial experts advise consumers to buy cautiously and not overextend themselves over the next two months.
Help available for those struggling
Unfortunately, many people are struggling with credit card debt not because they cannot resist buying the latest hot gadget or gizmo. Instead, many use credit cards to finance expenses such as hospital bills, medicine and other necessities that they cannot afford to repay outright. If you are struggling with credit card debt, filing Chapter 7 or Chapter 13 bankruptcy may be the best way of dealing with your problem.
In either type of bankruptcy, virtually all credit card debt is discharged, relieving you of all obligations to repay it. Additionally, bankruptcy can eliminate or reorganize your other debts, giving you a firm financial foundation once you complete the process.
If you are in dire financial straits, bankruptcy may or may not be the solution that would be best for you. An experienced bankruptcy attorney can consider your debts, assets and long-term goals and recommend the best solution for your individual situation.