1.3 Trillion American Debt

This summer Americans have amassed the highest amount of credit debt in U.S. history with over 1 trillion dollars of debt in June according to the Federal Reserve nearly equal to the GDP of Russia. Out of the total debt, 1 trillion dollars was credit card debt. Before this, the last record for credit card debt was in April 2008.

These stats should be an eye opener for Americans and even if you believe you have a good hold on your credit card debt the situation could change very easily. One frequent mistake I view it people requesting returns on the interest they pay on their debt.

They believe investments could provide them with the money they pay on their cards but at most, it could help them break even. Since investments don’t function like that, you can never find one that will provide a return higher than the interest on your credit card since that interest is too high.

In reality, credit cards are never manageable if you are paying interest on balance you haven’t paid then you already have a problem. The average balance that remains unpaid is around 9,600 dollars with 1,254 dollars in interest per year. Since interest rates only increase banks unload the rate increase onto consumers.

Credit cards are not always bad though since in some cases they can be helpful to manage finances. They are more convenient than carrying around cash, and many credit card companies offer perks and bonuses if a certain amount of money is used in transactions from that card. While these rewards are good for those who can complete their payment, it can lead to certain people entering a debt cycle.

The major problem is Americans using the money they do not have, and often debt is hidden behind other products which pretend to make the debtor’s financial situation better. The best way is to pay off any debt you have at the end of your month and if you find you cannot pay it off then cut back on expenses.

A better way of looking at spending less would be that what you don’t spend at present is available for you in the future. A proficient investor named Warren Buffett compared this with the fact that someone can only sit in the shade if someone else planted a tree a long time before. The savings made through less spending are those planted trees.

Americans need to start accepting credit card debt as the major problem it is. They also need to reduce spending to bring expenses under control. However, do not think of them as sacrifices. A credit card makes people impulsively buy something they may not be able to afford; we need to accept responsibility for this huge debt since it did not amass overnight. Since it takes time amassing debt, it will be a long time before you get rid of it as well.

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