As revealed by a survey conducted by the National Foundation for Credit Counseling, around 20% of Americans are of the opinion that having credit card debt continually for months is a good way of managing finances. However, according to a number of financial experts, this would be a wrong belief.
Living with this type of debt indicates that you are paying more for items than the real cost, as interest and for late payments, in the form of extra fees. If it is a continually growing debt, eventually the borrower might become incapable of maintaining the cards or availing any other type of credit.
National Foundation for Credit Counseling VP, Gail Cunningham, says that people possessing high balance relative to the credit time would see their credit scores going down. It is also indicative of the fact that when the real emergency arises, like an immediate requirement to purchase new car tires, you would not be able to cover those costs since all existing lines of credit had been used up.
Owing to this reason, financial experts usually advocate paying off credit card bills completely every month, or at least arriving at the ways to pay down balances with the aim to ultimately paying these off.
As per a report released from Chase Blueprint and Aite Group, 40% of the 1,242 respondents stated that at present they are saving more compared to the savings during the recession. Consumers are increasingly becoming financially literate and comprehending financial products and the associated fees.
In the meantime, credit card debt levels are registering a decline over the past half a decade, as stated by Equifax chief economist Amy Cutts. She says that currently, consumers are utilizing their credit card in a manner different from what they used to do in the past, and the result is that they are going on debt.
Consumers who consider themselves as possessing financial plans are perhaps the ones who will have some kind of monitoring on their credit card spending. A new research conducted by the Certified Financial Planner Board of Standards and the Consumer Federation of America revealed that around one in five ‘decision-makers’ in the household think that they are big-time financial planners. Again, another 40% of the approximately 1,000 respondents consider themselves to be more basic planners. The survey concluded that the big-time planners were the ones who are more likely to save as well as effectively manage their debt.
According to CFP Board CEO Kevin Keller, planning comes with a purpose. It makes people more confident about managing finances both in the short as well as long term.
In case of some people, the build-up of debt is due to the fact that they spend more than what they earn. This pattern might pave the road for financial destruction. Cunningham says that the only way to take control of the spending is to cease charging and begin paying down all due balances. Sometimes, accepting credit card debt as a component of a larger plan might be a smart move. For instance clothing for a job interview and health care costs may possibly be smart credit card purchases since investment is being done in the future.
