Credit card debt is rising in Michigan and the rest of the country. The average borrower carries a balance of $6,000 on their credit cards, which is enough to pay for a couple of months of rent or mortgage for most people. Here are some key factors contributing to the alarming rise in credit card debt.
Credit is easily accessible
Financial institutions offer credit cards with many enticing benefits and are easily accessible to consumers. Not to mention, swiping a card is convenient, which can lead to impulse buying and the accumulation of credit card debt over time.
Interest rates are high
Many credit card issuers charge high-interest rates. When consumers carry a balance from month to month, their credit card debt quickly escalates because the interest continues to grow.
Prevalence of consumer culture
Societal pressure to acquire material possessions and experiences is everywhere. People feel pressured to instantly gratify themselves, even if it means they will plunge themselves deep into debt. Sometimes, the debt acquired is too much that consumer bankruptcy results.
Life is unpredictable, and emergencies sometimes occur. Many plan poorly for emergencies, as they do not have a robust emergency fund. Thus, they are heavily reliant on credit cards. Using credit cards to pay for unexpected expenses can dramatically increase debt.
Only making minimum payments
Many credit card issuers allow consumers to make minimum payments. While this provision may offer temporary relief, it extends the repayment period, causes interest to accrue, and traps consumers in a cycle of debt.
There are measures that consumers can take to avoid credit card debt. Putting away funds for a rainy day, avoiding impulse buying and spending no more than 30% your credit limit are good habits to cultivate.