Back in December, CreditCards.com did a survey asking 1,000 Americans about their debt and their thoughts surrounding it. What the survey revealed was quite shocking. It found that as much as 25% of the population believes their debt is so great, they’ll never pay it off. In fact, they expect to die with a large amount of debt left to be dealt with.
41% of those surveyed say they have no clue when they’ll be able to pay their debt off. They’re working on it, but apparently don’t have it budgeted out. 65% say they’re not sure when or even if they’ll ever. These are terrible statistics that are making life difficult for everyone. Having significant amounts of debt hurt the economy as a whole.
An analyst for CreditCards.com, Ted Rossman, described these stats as “depressing” and one that everyone should try to avoid.
“You’ve got to do whatever you can — whether it’s a balance transfer, taking on a second job, cutting expenses, or whatever you have to do,” he added. “Credit card debt has a much greater impact on your finances than something like a mortgage, an auto loan, or a student loan, because those products are all in the 4, 5, 6% range. Credit card rates are so much higher.”
Growing Credit Card Rates
Credit card interest rates are currently higher than any type of loan out there. These rates recently came into focus after both Bernie Sanders and Alexandria Ocasio-Cortez came out in favor of legislation to se the rate at 15%. They hope lowering the interest rates will help all Americans, but especially the working class.
“There is no reason a person should pay more than 15% interest in the United States,” the freshman representative wrote on Twitter. “It’s a debt trap for working people + it has to end.”
“Practically speaking, I don’t think that’ll become law any time soon,” Rossman said of the proposal, “but I still think it’s an important discussion to have because credit card rates are really high.”
“We know … that about 40% of cardholders are already paying their bills in full each and every month, so that’s great,” Rossman said. “Those are the kinds of people that are great candidates for rewards. But, the 60% who are carrying debt really need to prioritize their interest rate over all else. Unfortunately, a lot of people aren’t doing that.”
The reality is, overall household debt has been creeping up in recent years. Despite a robust economy, people are leaning more on debt than ever before. Perhaps they believe they can afford it with the extra cash in their pockets, but it’s still only 40% of people who pay their credit card debt in full.
“We feel like most people are being responsible,” Rossman said. “Most people who have credit card debt didn’t get there because of a vacation. They didn’t get there because of a shopping spree. They got there because something happened with their health, their car, their home, or they’re just having trouble making ends meet.”
“That’s a tough situation to be in,” Rossman added. “I think it brings up some of the fundamentals of personal finance about doing whatever you can to budget, live within your means.”
