Law Office of Allan E. Dunaway, PLC

Be careful about increasing credit card debt during the holidays

The holidays are upon us and, with the frenzy of finding the right gift for everyone on your list, credit cards will be the payment method used by many Americans. While the convenience of credit cards and the ability to pay off the cost of gifts after the first of the year may be tempting, for many families it is only exacerbating a disturbing problem. According to recent reports, total household debt is growing faster than household income and credit card debt is the third largest type of debt, following only home mortgages and student loans.

According to a recent report from NerdWallet, the average credit card balance in American households that carry debt is over $16,000. If that isn’t alarming enough, many of these balances carry twenty percent or more in interest, costing the average credit card debtor $6,274 per year. So even Americans who have stopped using their credit cards in an attempt to decrease their debt are still accumulating more debt on a monthly basis.

Some may criticize those with credit card debt, saying that it is the result of irresponsible spending. But the numbers show that what some would consider frivolous expenses such as clothing and recreation are two categories of unsecured debt that have not exceeded income growth.And the three percent gap between the cost of living and income may seem minimal, but when you add in factors such as chronic health problems or the cost of living in larger cities, that gap can be a critical difference.

Several factors beyond the control of debtors in Kentucky and across the country may make the problem even worse over the coming months. The Federal Reserve can raise interest rates, increasing the time some households will need to pay off their balances to as much as forty years. And over the last twelve years, the cost of living has exceeded household income, leaving some Americans in a situation that may keep them in debt for most of their lives.

A lifetime is too long to bear the pressure of unmanageable debt. While filing for bankruptcy may seem like the last resort for some people, it is a way to better manage debt that can’t discharged such as mortgages and student loans. A consultation with a bankruptcy attorney can help you determine the best course for eliminating or managing excessive debt.

Source: New York Post, “Increased credit card use fuels household debt,” Gregory Bresiger, Dec. 5, 2015

Secondary Source: NerdWallet, “2015 American Household Credit Card Debt Study,” Erin El Issa, accessed Dec. 10, 2015

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