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Potential side effects of relying on credit cards

Kentucky residents may be aware of the upfront costs of using credit cards, including interest rates and annual fees. However, there are other side effects to relying on credit to make purchases that tend not to be discussed in the pages of disclaimers that are handed out when a person completes an application and accepts that shiny, new card.

Research has revealed that people who live within their means can be satisfied with their lives, whether it is low, medium or high. However, people who experience a decrease in lifestyle are typically dissatisfied, even if they would have been content living at the lower standard all along. Many people have a habit of using credit cards to live beyond their means. Living on credit indefinitely is not sustainable. Thus, at some point, it becomes necessary to reduce spending, which means that the consumer lifestyle takes a hit. As a result, long-term reliance on credit cards and a corresponding increase in unsecured debt can lead to dissatisfaction when it is time to stop spending and start paying.

Another issue arises when people use credit to supplement their income, hoping for an increase in earnings or a decrease in expenses later. If the expected increase does not arrive, or worse, a family member dies, is laid off or experiences a pay cut, consumers can find themselves in a situation where they are unable to make monthly payments and find themselves facing a lawsuit.

It can be difficult to get out from under credit card debt, especially when most income is used to pay preexisting debts rather than covering ongoing needs. An attorney may be able to help negotiate settlements on large unsecured debts or advise on when bankruptcy might be a good option for relief.

Source: FOX Business, "The Side Effects of Credit Cards", Richard Barrington, June 05, 2014

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