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Credit Card Debt is on the Rise

With consumer confidence growing, many consumers are pulling out their credit cards once again and forgetting about their savings accounts. A recent survey by Bankrate.com found that almost 30 percent of Americans have more credit card debt than they have in savings. Additionally, only 51 percent have enough emergency savings to pay off their credit card debt.    

In the last quarter of 2013, America’s debt, which includes mortgages, auto loans, student loans and credit card debt, rose 2.1 percent or 241 billion. That is the largest increase since the third quarter of 2007. “People are feeling more confident in their financial situation,” states Jana Castanon, spokesperson for Apprisen. “They have endured the struggles of the last 6 years and are rewarding themselves at the expense of accumulating more credit card debt. It seems many have forgotten the lessons of the past. “

Before credit card debt gets out of control, Apprisen offers some tips to decrease debt and increase savings:

  • Write down all your outstanding debts. It’s important that you know who you owe and how much. Make a list of your creditors, balances, interest rates and minimum payments due. Once you look at the total, you might be surprised at how fast the debt accumulated and be more motivated to pay it off.
  • Create a spending plan. Allocate every dollar that comes into the household, to a specific spending category. Don’t forget to include your periodic expenses, such as gifts, clothes, insurance, etc. Then, look for ways to increase income or decrease expenses to generate additional cash flow to apply towards your debt.
  • Create a debt snowball. Make minimum payments on all your debts except for the one with the lowest balance or highest interest rate, whichever you decide you want to pay off first. Then apply the additional cash you have “found” in your budget to that payment. When that is paid off take that whole amount and apply it to the next account. Make a commitment not to use your credit cards during this time.
  • Transfer a set amount from your paycheck to a savings account. Increasing savings is equally important as paying down debt. Automatically transfer a specific amount from your paycheck to a savings account. Be realistic in what you are putting in. If you are putting in $50 and taking out $50, you are defeating the purpose. If you could only put $20 in and leave it in, you will be more successful in building your emergency fund.

"Sometimes, it is too easy to fall back into old patterns of behavior,” continues Castanon. “Before it’s too late, make a conscious effort to get your debt under control and your emergency savings funded, so when the next life event happens you will be financially prepared.”


 
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Apprisen, a national nonprofit credit counseling agency, has been helping consumers manage their finances and get out of debt for almost 60 years.

 

 
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