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America Struggling with Debt
By: Kelly Kennedy

It’s no secret that America is struggling with debt.  America trillions of dollars in debt and the number is skyrocketing fast.  Today more than 75 percent of American families have at least one credit card, which is understandable if wanting to buy airline tickets, rent cars, make reservations, and shop on the Internet.  Having a credit card is very useful but with the statistics of debt being so high we can see that the privilege is being abused.

Many people can benefit from use of a credit card, one being the card owner, but mainly the banks.  Banks are looking to bank the most for their buck so to do that they need to keep people paying more money over time which will allow banks to gain more interest.  That's why the minimum payments on credit cards have been reduced to as low as one percent of the total balance owed. Credit card holders think making the minimum payments will be easy enough with that small of a percentage however you wont be saying that once you realize that chunk of debt you have, is far from disappearing.  

Most banks usually make the minimum payment only 2 to 3 % of your balance meaning if you owed $5,000 on a credit card with a 2% minimum payment of the balance you would only be paying $100 toward decreasing your debt and the majority would be applied towards interest not principal.  If you can’t afford $100 a month, just imagine how long it could take you to pay off this debt.   

 
Financial experts agree that personal responsibility could prevent most debt problems so basically, if you can’t afford it, don’t buy it.  However some blame is still put on the banks who lure new customers in with low rates, then drastically increase the interest if they're late on just one payment.  Many consumers don’t read the fine print material on paperwork thorough enough to be aware that banks can raise your rate if you're late paying a completely unrelated bill, such as a mortgage payment.  That’s why it’s so important to read every little detail before authorizing any paperwork.

Banks argue that if a credit card holder makes a late payment, it indicates risky credit, thus justifying higher interest rates. However in recent years banks have redefined what is risky as frequently raising rates and charging penalties if a payment is late by only a few minutes. According to Robert Manning, a well-known industry expert, late fees rose from $1.7 billion in 1996 to $7.7 billion in 2003.

Officials at the American Bankers Association, a trade group representing the credit card industry, stated: "Lenders use penalty fees as a risk-management tool against customers who mishandle their finances."

You’re probably wondering how much debt is okay? According to one of the nations largest non-profit credit counseling agencies, if you answer yes to two or more of the following then you are in need of financial assistance. 

• Do you carry a high balance on your credit cards?
• Do you find it difficult to pay your bills on time?
• Do you pay only the minimums on your credit cards?
• Have you been burdened with debt for more than 6 months?
• Are you receiving calls from creditor and/or collection agencies about late payments?

It’s recommended that your mortgage payment plus property tax and home insurance should total no more than 40 percent of your personal income after taxes and health benefits have been deducted.  Total debt should never be more than half your personal income and that's assuming you're putting the maximum amount you can into a 401(k) before taxes or into a youth IRA.

Stressed to keep up with those payments, you and nearly 9 million Americans seek debt counseling every year.  Consider if credit counseling is right decision for you to make to eliminate your financial burdens and get on with a successful life.