Over the past few months, U.S. citizens managed to hit a negative milestone: $1 trillion of credit card debt, an all-time high. In June 2017, there was $1,021 trillion in outstanding revolving debt, according to Newsmax, citing a report from the Federal Reserve. This is the same as the gross domestic product of Russia
The same source reveals that the previous record, of $1,020 trillion, was set in April 2008.
A serious wake-up call!
A lot of people consider that they have a good handle and don’t pay by credit card that often, it’s enough to deal with one emergency, in order to start sinking in debt. And this happens pretty often in the United States, as users are reaching credit card limit very fast.
Besides this, another very common mistake consists of people asking for investment returns that manage to surpass the interest they are actually paying on their debt. People believe that, with the correct investment, they can obtain a higher return than what they are paying for, but the most they can expect is to break even.
Investments just don’t work this way, though, as a reliable one, able to guarantee consistent returns at a high rate, comparable to the interest, is very hard to find.
Credit card debt is not manageable
If you’re in a situation in which you need to pay interest on an outstanding balance, it’s obvious that you have a serious financial problem.
On average, the monthly balance for a borrower who can’t pay the balance in full is $9,600, on $1,254 in credit card interest paid every year. And the bad news is that interest rates will only go up.
To summarise, we can’t say that credit cars are inherently bad since when they are used properly, they can be a way of managing your finances very good.
Also, let’s not forget about cash back credit cards or rewards cards, which are excellent for getting a couple of freebies, depending on their fees and, of course, how much you shop.