Credit card debt explained and how to cut the loan
You’re probably wondering why here in the United States we have such a big problem with the credit cards. It’s really simple, when the economy has problems and the stock market suffers as a result, the Federal Reserve Bank steps in and starts to lower interest rates. In turn interest is cheaper for Banks to loan out money. Individuals are then able to get a loan at a lower rate of interest. That’s what happened years ago during the early 2000′s. The Fed or Federal Reserve cut rates so low that it was easy for anyone to get a loan because the economy was suffering and it order to get it going it made it easy for people to borrow money. It didn’t matter if the person did not have a great paying job or assets since the lenders, banks, etc. made it so easy for people to get loans. Then everything started to crumble once the economy was ok the Fed started to raise interest rates again.
Most people you know buy things all the time on credit. Most of us do not make that much money to be able to afford luxury. So, they rely on credit cards to purchase all these items. It is said that most households in the US owe at least $6,000 in credit card debt. Some other resources on the Internet say $8,000 or $9,000. That’s a lot of money especially if the interest is the low teens, say 15% percent. However, people continue to buy things on their credit cards, whether it’s dinner, a few bottles of wine, clothes and vacations. The list can go on and on. So you see people are just accumulating debt at a tremendous rate.
If you have a lot of credit card debt then you need to take care of it immediately. Please don’t buy things on impulse, it’s the worst thing that you can do. Letting your emotions dictate your spending habit is a recipe for disaster. It is recommended that you pay down your highest credit card debt first. Then work your way down, but if you’re in deep debt, you may need to contact a debt consolidation business. They will usually help you, but be careful, don’t use a home equity line of credit to pay down your bills. You see it all the time on TV or in your local newspapers. Home Equity is basically the amount of money already paid on your house. That is what’s called Equity and some people take out loans on that money and find it difficult to pay it back. What happens is you now have no credit card debt and you start all over again using your cards. And, don’t forget that equity loan has to get paid back as well. Just because it’s part of your mortgage payment doesn’t make it any easier to control your debt, it becomes much harder. That is what’s going on right now. Banks are getting into serious problems because people can’t afford to pay back the loans so they go into foreclosure and lose the house. In some cases people lose their house entirely since the house is no longer worth what it once did a few months or years ago.
All you have to remember is to not use your credit card. Save your money and buy whatever you need. If you can’t pay the bills entirely this month you better make sure you pay it soon enough and don’t keep adding purchases to your credit cards. Also, be aware of those department store cards, they’ll rip you apart with interest. It is still hard to justify why they charge so much. Why don’t they keep it low and I bet they’ll get so much more business. A card charging 22%+ is just insane. Don’t do it and if you do, pay it off as soon as you get the bill.