Credit card debt in the U.S. skyrocketed to $1.08 trillion in the third quarter of last year.
While credit cards can be a godsend if you need to buy something sooner rather than later, the debt can pile up and grow in a compound interest sort of way quite quickly. And, before you know it, the debt can get to the point where you’re overwhelmed with no hope in sight.
Keep reading to see five reasons people get into trouble with credit card debt — and ways to avoid falling into any of these taps that can jeopardize your financial well-being.
- Living Above Means
People often get into credit card debt by living beyond their means. It’s one thing to want something, but it’s another thing to need something. You must separate wants from needs to avoid spending too much on non-essentials. Spending money you don’t have on things you don’t need — especially when doing so with a credit card — can land you in financial hot water.
- Failing to Consider Interest Rates
The average credit card interest rate in the U.S. is 22.92%, which is up close to 2% since 2010, according to WalletHub. If using a credit card without paying attention to interest rates, you can quickly find yourself with an unmanageable debt load. When looking for a credit card, choose one with a lower-than-average interest rate. You’ll potentially save a ton with a lower interest rate.
- Making Merely the Minimum Monthly Payment
Yet another reason people get into credit card debt is failing to make more than the minimum monthly payment. Yes, making the minimum payment will ensure compliance with the rules. But the principal amount will continue to grow — due to the high interest rate — if you fail to pay more than the minimum amount. Considering that credit card companies tabulate interest daily, the debt can grow out of control even if you’re faithfully making minimum payments.
Even a little bit above the minimum payment will help you reduce your outstanding debt.
- Spending More Money Than You’re Bringing In
Another sure way to get into credit card debt trouble is spending more money than you make. It’s easy to whip out a credit card and pay for what you want, but doing so without self-control can lead to more problems than they’re worth.
If you can’t afford to pay off the amount within a month, you can’t afford to buy it. It’s really that simple. And knowing what you can and cannot afford — and being honest about it — will help. You’ll stay out of trouble when you become more aware as a consumer.
- Ignoring You Have a Problem
Yet another sure way to get into trouble is by failing to acknowledge a problem. If your credit card debt is growing and you’ve lost your job, contact the credit card company. You might be able to work out an arrangement — something you can’t do if you bury your head in the sand.
Any of these problems can get you into trouble faster than you think. If you’re swimming in credit card debt and don’t know what to do, consider contacting a lawyer for legal advice. A lawyer can help you make sense of the situation if things have gotten out of control.
You don’t want to continue doing the same things that have brought little or no results. A bankruptcy lawyer can help you decide whether a bankruptcy filing is the best option, or if there are other things to do so you can get a fresh start and move on with your life.