Credit Card Debt: The 5 Biggest Causes
Far too many Americans are drowning in credit card debt. For people across the country, this type of consumer debt is like its own monster, growing and eating into more and more of the monthly budget as time passes. According to a recent CNBC article, Americans collectively owe nearly $1 trillion in credit card debt. Yes, that’s trillion with a “t.” That’s an unfathomable amount for just about anyone.
Why do people wind up dealing with credit card debt? How does this happen, and how can people avoid it or get rid of it? How much credit card debt is truly unavoidable? As is the case with so many questions, there are no real, easy answers. This is particularly true when one looks at the details of another recent article published by CNBC that digs into the leading causes of credit card debt. Below is a discussion of the article and these causes, and we’re also going to offer at least one possible solution afterward.
About the Credit Card Debt Article
The article being discussed here focuses on a recent survey from CreditCards.com. Overall, nearly half of the respondents – 48 percent to be more specific – carry some type of credit card debt on a month-month basis. Most of us already know that in general, credit card debt is among the worst type of debt that a person can carry, as it doesn’t add wealth like a mortgage and it grows faster than most other types of debts due to exorbitant interest rates.
That number alone is troubling enough, as is the overall amount of credit card debt in the United States as mentioned above. Below are the five leading drivers of credit card debt based on this survey.
1. Emergency Expenses
One of the main reasons that people have credit cards in the first place is for the specific reason that is emergencies. There are times when we may have problems that include:
- Car trouble
- Injuries
- Illnesses
- Home damages
All of the conventional wisdom regarding personal finances states that we should have savings to cover a few months of expenses, but according to several reports, only 40 percent of Americans even have $1,000 saved to handle these surprises. When that’s what happens, the next option is often credit cards. Nearly half of the people in the survey we’re discussing listed emergency expenses as the reason they are carrying credit card debt.
2. Day-Day Expenses
We all understand that with the current rate of inflation and other factors, things we buy on an everyday basis are becoming more expensive. Below are just a few examples of things that cost much more now than they did even a few years ago:
- Gas
- Groceries
- Clothing
- Childcare
These are “have-to-have-it” items for most families. After all, we can’t make any money if we don’t fuel our vehicles to get to work, and we all have to eat. It’s troubling, but nearly one-quarter of the respondents to this survey mentioned day-day expenses as a big driver of credit card debt.
3. Retail Purchases
We’re starting to move from the “unfortunate necessity” category of drivers of credit card debt into the “these could possibly be avoided” causes. One of them is retail purchases, and common examples of these include electronics, handheld entertainment devices, non-essential clothing items and other things. These may make our lives easier, but they’re also things in many situations that we could do without and avoid incurring the credit card debt that comes with them. 11 percent of respondents to this survey cited retail purchases as a cause of their credit card debt.
4. Vacation and Entertainment Expenses
We all need a vacation from time to time, and we all benefit from taking a night or two for ourselves and enjoying a nice dinner, concert or theater performance. It’s important that we recharge our batteries so that we can maintain our pace in the grind that is everyday life. However, when we incur credit card debt in order to do so, we’re not only borrowing money to make these things happen, we’re also borrowing stress that will arrive when those higher credit card balances start showing up and minimum payments rise. Once again, 11 percent of respondents named vacations and entertainment as drivers of credit card debt.
5. “Other” Expenses
Finally, seven percent of survey respondents stated that “other” expenses were the main reason for their credit card debt. That catch-all category could really mean just about anything, so it’s impossible to analyze whether this type of credit card debt could be avoided. If it involves something like veterinarian bills and the like, then this would obviously constitute a problem with a loved one that requires help. If it’s something else such as a service of convenience, then once again, this could likely be avoided.
What Should We Do Now?
The bottom line is that, regardless of the cause or causes of credit card debt, too many people are faced with payments that all but debilitate their ability to have any type of financial flexibility or stability. The best answer for everyone is, obviously, do not use credit cards unless you absolutely have to, as that alone will keep credit card debt down for a lot of people. As you see above, though, that’s not always possible.
That leaves one question: How does a person or family get credit card debt under control? Fortunately, there are a lot of options available, and one way to begin to understand them is to subscribe to Wade Torkelson’s newsletter. In it, he will provide readers with extremely useful updates and information that will help them deal with debt and with creditors. Subscribe today and begin the process of understanding your situation and, perhaps more importantly, your rights and options.
