Consumer debt is a rising epidemic in American culture today, with average debt quickly approaching $15,000 per US household.  Considering the fact that the US is one of the richest nations in the world, what is causing this inability of individuals and households to fulfill their monthly financial obligations?

It’s no longer a closeted fact that the nation’s liberal use of credit cards underlies this American debt epidemic.  It is estimated that 40% of American households spend more than they earn on an annual basis and our easy access to credit cards is a major cause of these blind spending patterns.  Individuals and families that lack the responsibility to keep up with monthly financial obligations simply dig themselves deeper into the black hole of consumer debt.

Overspending is not the only cause of consumer debt.  Financial crisis’s can happen to anyone at any time and leave a painful burn in your financial disposition.  Job loss, medical bills, and car repairs are some urgent expenses that require fast and easy access to money and often credit cards are the simplest solution to the problem.     

Credit card debt occurs when the holder of a credit card purchases a product or service via their credit card company and fails to pay off the balance of the credit card at the end of the repayment period.  Credit card debt accrues due to the outstanding balance on the credit card along with the interest expense and late payment penalties. The ramifications of credit card debt, or any type of consumer debt for that matter, should be taken very seriously.   Bad credit is a consequence that one should never be willing to risk.  Poor credit causes a significant reduction in your credit score along with numerous other problems, such as difficulty in renting a house or apartment, being hired for a job, and being approved for future loans.  Furthermore, a poor credit rating causes a person’s loan interest rates and insurance rates to increase bringing further expenses to the table.  It just isn’t a situation that you want to experience and the bad news about credit card debt doesn’t end here.

When an individual fails to pay off the balance on their card, the credit card company contacts a credit rating company and reports the client’s default on his or her credit card.  A default made on your credit card results in increased rates and terms on the credit card by your credit card company.  What’s even worse, is that when other creditors discover that you have defaulted on one of your consumer debts, they may also decide to increase the rates and terms on your loan with their company even if you have not defaulted with that creditor.  This incident is known as the ‘universal default clause’ because when one creditor makes a default complaint on your part, other creditors respond by adjusting your loan from normal terms and conditions to default terms and conditions.  This means that you can end up with increased interest rates on multiple loan which can dig you even deeper into the black hole of debt.   

By now, the point should be very clear to you that credit card debt is a dreadful situation to be stuck in and that’s why financial responsibility is very important for all of us to seek.  Once your credit rating drops from good to bad, it is extremely hard to build your score back up to a satisfactory level.  Furthermore, who wants creditors and debt collectors hounding you down just to get money for all your outstanding debts?  That would be a nightmare.  Individuals that have a credit card should approach it with a careful and responsible attitude toward spending.  You should only purchase items that you are certain you can afford to pay for when the repayment period rolls around. If you are a person that tends to engage in impulsive spending, you should leave your credit card at home and only walk with a reasonable amount of cash to avoid overspending and impulsive buying.