Understanding Card Credit Debt
Most of the people in America have more than one credit card and keep spending, thousands of dollars without much thought on what they are buying and if it is necessary. This is the reason that the average American credit card debt is much more compared to other places. This debt results in bankruptcy, which has long lasting consequences and should be avoided.
To avoid problem like bankruptcy, the best think that you must do, is to totally stop using credit cards or you can have one for emergency. Ensure that the card credit debt amount is not more than 36% percent of your total income. The total income of your family includes you, your spouse and the other family members. You must evaluate your need before using credit card. Debts are mainly of two types, some are good debt and some are bad debt. Good debts can be anything that you need badly but cannot afford. To afford some of the good debt may be you need to liquidate your investment, which has been kept aside for emergency. This is the reason that if you feel, the debt makes sense you can use your credit card. After using the card ensure that the debt is divided into monthly payment mode, which is convenient to you.
Some of the good card credit debt includes home debt, debt for your child’s higher education or financing a vehicle. Even if you decide on some good debt, you must sit and plan out on the amount of money you can put down and how much debt you can afford. The maximum amount of money you manage to put will reduce your debt amount, which will result in less interest that you need to pay, over a period of time. You must never pour all the cash that you have, especially to buy a house. The cash that you have will help you in settling other debt, in case if you have any. Usually the interest charged on mortgage loans is lower than the other debt, this is also a reason to preserve extra cash and finish off the other loans.
Avoid card credit debt for things that don’t add value and are depreciating assets. Bad debt includes usage of your card in restaurants, buying furniture or using it in any retail stores. If you use your credit card for such bad debt, then it is always important that you read the fine prints carefully and understand the rules and regulations. Some retail stores charge a very high rate of interest and even if they are low they have set rules. The rules might include low interest or non- payments till a particular date after the purchase made and then they charge a very high rate of interest starting for the day you made the purchase.
You must also ensure that you have a cash cushion for you living for a minimum of six months before going for a card credit debt. This fund cushion will help you during emergency and will also avoid serious upset of finance.
Average American credit card debt is much more compared to other places. Credit card debt can be overwhelming.
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