A large credit card issuer has a marketing campaign whose television commercials end with the question, “What’s in your wallet?” No doubt, you have seen one of these commercials. Credit cards are big business. As of June 30th, the total amount of revolving debt carried by Americans exceeded $1 trillion. To put that amount of money in perspective, let’s say that you were very, very wealthy. If you stacked up your money into stacks of cash containing $1 million per stack, you would need one thousand stacks of cash to have $1 trillion. That’s a lot of money!
Why and How People Fall Behind on Payments
About three quarters of that amount is paid on time. But, approximately $23 billion of that total credit card debt is delinquent, meaning a payment is more than 30 days past due. Why do people fall behind on credit card payments? Several reasons have been identified. Some people are spending too much on non-essential items. Another reason is too much of other types of debt like student loans, car payments and the like. Still other reasons may include:
- the fact that it is normally very easy in the first place to get a credit card;
- higher prices for consumer goods;
- higher interest rates; and/or not enough income to cover everything else AND the credit card debt.
- Finally, and perhaps most interesting, some people are delinquent on their credit card payments because they forgot to pay!
Other Common Reasons for Credit Card Delinquencies
The personal finance website, NerdWallet, found that one reason for rising credit card delinquencies is that income growth is not keeping up with Americans’ biggest expenses. According to NerdWallet, medical, food and housing costs have outpaced income growth over the past decade. Rapidly rising education costs have also been part of the problem.
Another factor is that many people will skip a credit card payment before they would skip a mortgage payment or a student loan payment. Of course, skipping a credit card payment for any reason will get you into trouble very quickly. This course of conduct can lead to late fees, larger interest payments and drops in your credit score.
As with all forms of debt, the best way to eliminate it is to pay the debt when it’s due. If this becomes impossible, your best option is to consult with a reputable and competent debt relief attorney.
My personal belief, after over 25 years of representing individuals and families facing overwhelming debt, is that one should avoid paid credit counseling services or non-bankruptcy debt consolidations. While these services may be beneficial to a few, persons who are experiencing financial difficulties that they cannot handle need the advice of competent counsel who is informed of all the circumstances.
Most reputable debt relief attorneys will offer a free consultation to discuss your situation. Part of that discussion may be non-bankruptcy alternatives if the same exist under the circumstances. If not, an honest discussion of the advantages and disadvantages of a Chapter 7 bankruptcy or Chapter 13 debt consolidation will help identify the proper solution.