2010 is nearly half over and already this year we’ve seen many changes to the credit card industry. The biggest change came with the largest sweeping reform of the industry via the Credit Card Reform Act of 2010.
While the Credit Card Reform Act is designed to assist consumers from being misled on statements or inappropriately given increases to interest rates without proper notification, the Act is unable to change or help people develop better spending habits.
I’ve included some recent statistics and some things you may want to ask yourself before putting your next purchase on plastic.
First let’s start with a handful of the statistics compiled at www.CreditCards.com.
- Average credit card debt per household with credit card debt: $15,788
- Total credit cards in circulation in U.S: 576.4 million, as of year end 2009 (Source: Nilson Report, February 2010)
- Average APR on credit card with a balance on it: 14.67 percent, as of February, 2010 (Source: Federal Reserve’s G.19 report on consumer credit, May 2010)
- U.S. credit card 60-day delinquency rate: 4.27 percent. (Source: Fitch Ratings, April 2010)
- Total U.S. consumer debt: $2.45 trillion, as of March 2010 (Source: Federal Reserve’s G.19 report on consumer credit, May 2010)
The statistic that stands out most to me is the average credit card debt per cardholder is over $15,000. With the average interest rate at 14.67 percent it would appear that the average cardholder is being charged over $2,000 per year for interest payments.
With those figures it would be safe to assume that if you carried a $15,000 balance annually for 10 years you could be out over $20,000 in interest payments. Could you find a better use for that money? I’m sure you could.
Don’t get me wrong, credit cards have a purpose and can be useful; unfortunately borrowing on credit can also have expensive long term effects on your banking balances.
Before purchasing something on credit make sure to identify how long it will take you to repay the cost, including interest. Save yourself future headaches by only purchasing needed items that you can repay in a short period of time, preferably 30 days.
An ounce of prevention will go a long way towards positively shaping your financial future.
Do you currently find yourself struggling to make monthly payments to your creditors? If so, or if you have any questions, please call us at your convenience. As always, we are here to help and look forward to hearing from you.