Why is it So Hard to Clear Credit Card Debt? Here’s Why
Navigating credit card debt is like being stuck between a rock and a hard place for many folks. Sure, credit cards are handy for spicing up your credit score, but they can be a major headache, plunging you into a cycle of debt that’s hard to escape.
Financial gurus will tell you to pay off your total card balance monthly, but life isn’t always that easy. Unexpected bills, fluctuating income and rising interest rates often see us reach for our trusty plastic. In fact, WalletHub reports that the average family in the US had a credit card debt of over $8,000 by the end of 2018.
If you’re finding it tough to pay off this kind of debt, don’t beat yourself up. It IS tough. Let’s see why:
1. It’s a Snap to Get a Credit Card
Most of us are swamped with credit card promotions in the mail. Some even come pre-approved with offers of low-interest rates. Fast or instant approval is a common carrot to draw you in. And there’s a card for everyone these days, from store cards to balance transfer cards. So, it’s pretty easy for any of us to find a card (or few) that we qualify for.
2. We Often Have More than One Card
Andrew Housser, a debt relief expert and co-founder of Freedom Financial Network, explains that the average person in their debt relief plan has around 9 or 10 different lenders. As you can imagine, managing different repayment schedules can be like spinning plates.
3. The Danger of Paying the Bare Minimum
Each card has a minimum payment due to avoid late charges, normally about two percent of the balance due or a flat fee such as $25. But constantly paying just the minimum is a bit like running on the spot. You might stave off the late charges, but the interest keeps growing in the background. It’s always best to pay more than the minimum if possible.
4. Interest – The Gift That Keeps on Taking
Credit cards use compound interest – the balance attracts interest, and that interest increases. It’s not hard to see how this can spiral, making it harder to reduce your debt. Plus, credit card interest rates are known to be quite high – they reached an average of 16.71% in 2018.
That’s why it’s crucial to know your card’s terms inside out – does the interest rate jump after an initial period? Are you getting the best rate for your credit score? If high-interest rates are weighing you down, consider transferring your balance to a card with a lower rate.
So, if you find paying off your credit card debt tough going, know that you’re not alone. Always aim to have a plan before swiping that card or agreeing to a new line of credit. And if you’re already in deep water, remember there are options available to help you get back on solid ground.