In the personal finance world, there should be one golden rule. Aside from living below your means that is. That rule is do not, for any reason, get into credit card debt. This is no secret, every financial guru denounces this kind of debt. But yet here we are. The Federal Reserve announced recently that Americans have a record high $1.02 trillion in credit card debt. Perhaps a more digestible figure is that the average household with credit card debt owes $16,425. This is shocking to me. I mean people do realize that the average interest rate on these cards is over 15% now right?
There should be no reason to have this kind of debt. None. Zilch. Instead, take out a Heloc loan (if you have a mortgage), borrow from family, steal (kidding), basically whatever it takes to not pay Visa or Mastercard ridiculous payments on top of what you owe. It should be the very first thing you pay off. I know things can get rough at times but just don’t fall into this trap.
I personally use credit cards for the majority of every purchase. Let’s face it, we live in a plastic world. Good luck living without one. The cards offer all sorts of conveniences and also safety. I have had my card company call me immediately when they spotted fraudulent activity. They shut the transaction right down because it looked suspicious. And if something does slip through the cracks and you do get charged for something you didn’t buy, most often you will get refunded without much hassle. Also, the rewards are nice. Anytime you can get cash, miles, or points back for things you would normally be buying anyways it’s a win. I’ve never paid interest on any of the cards however. I can stomach paying 3.25% interest on the mortgage but 15% on credit cards just isn’t even remotely feasible.
On the flip side of this, a person could find this info useful and make a decision to purchase some stock in the major credit card companies. One would have to stomach a little risk as I read that the write offs on debt not paid to credit companies was at a 36 quarter high last quarter. I am guessing that the super high interest rates would make up for a lot of that although I haven’t analyzed their financials too closely yet. I do know that a couple of the leading companies are just now breaking ground into China and India. Lots of people, lots of opportunity for interest rate gouging. It will be interesting to see if other countries are as irresponsible with the plastic as Americans are.