American Consumer Debt Worsens as Consumers Heavily Rely on Credit Cards

(March 26th, 2007)

(PRWeb) Recently, the major Credit Bureaus in USA carried out a study that indicates American consumers are using their credit cards more than ever before. Here are some statistics we compiled from these studies:

  • Out of a random sample of 3 million American consumers (included in Experian's National Score Index), 51% of them have atleast 2 credit cards and 14% of them have 10 or more credit cards.
  • These 14% who have 10 or more credit cards are using up atleast 1/2 of their credit card limits.
  • The study indicates American consumers are using credit cards not as financial emergency tools but rather as a way to finance their day to day living.

Pete Bolin, analytics manager at Experian quotes, "tend to suggest, on average, people in the last couple of years are accumulating more debt and are utilizing credit cards more than in the past."

Maureen Hankins, Director of YWCA Consumer Credit Counseling Services thinks the study conducted above is right on track. She says the people in her credit counseling programs average about 8 credit cards per individual. She also says people are not saving enough money to get by in times of financial emergency.

Howard Dvorkin, President of Consolidated Credit Counseling Services, Inc., thinks people are just too impatient and materialistic which then leads to increased credit card debt. He writes, "People have a ferocious appetite for items that they really can't afford. Many times they break down and charge it to satisfy their wants."

The Federal Reserve US says consumer debt has risen to a staggering $876.2 billion. Greg McBride, Senior Financial Analyst at BankRate.com quotes, "A lot of figures show that the consumer-debt burden continues to grow, and credit cards represent a lot of that additional debt. Credit-card debt represents a very high-cost debt for many households. Interest rates are in the double-digits with fees and punitive interest rates lurking should you slip up."

If you miss 1 or 2 payments on your credit card debt, the issuing company will skyrocket your interest rate to a whopping 27% - 30%! McBride thinks paying the minimum monthly balance each month on your credit card debt means NOTHING. Your bad spending habits will just force the credit card bill to go higher and higher up every month. Consumers should keep their balance-to-credit-limit ratio as low as possible.