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Recent Increases in Credit Card Debt

Posted By:  |  June 9, 2014  |  0 Comment(s)

A recent article posted on “Quartz” (qz.com) written by Matt Phillips announces that Americans are busting out the credit cards more frequently once again after a significant dip in credit card usage between 2009 and 2011. The year 2014 has seen a surge in revolving consumer debt, particularly in April of this year.

Part of the reason credit cards were used less frequently beginning in 2009 was due to policies that were put in place to hinder predatory lending, particularly the “US Credit Card Accountability, Responsibility and Disclosure Act (the CARD Act) which kept credit card companies from offering credit without seriously examining a customer’s ability to pay. This act also set in place strict rule for those who heavily marketed credit cards on college campuses to the 21 and younger crowd and limited credit card company’s abilities to attach heavy penalty fees with their cards. The “CARD” Act also monitored the circumstances in which a credit card company could raise their interest rates to help keep outrageous increases under control.

The economy struggled a bit several years back which likely had an impact on credit card spending among the average American so one could assume that this rise in spending via personal credit cards is indicative of an economy on the mend. According to the article, “Roughly 70% of US economic activity is driven by consumption…a rise in credit card use suggests that consumers are ramping up their buying. “

Even with the rise of consumer spending signaling a possible sign of an economy on the rise, it’s never necessarily a good sign to see a heavy reliance on credit card spending.

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  • How important is it to you for a debt consolidation company to offer financial education resources?
  • Takes your existing debt and try to settle with your creditors for a lower amount. If you pay off the settled amount, your debt will be considered paid in full.
  • Negotiates with your creditors on your behalf.
  • Fee based on a percentage of your total starting debt or a percentage of the debt they save you.
  • Most settlement companies have you create a separate "escrow" account where you will make monthly contributions over a certain amount of time to contribute to your settlement. Once there is a substantial amount of funds to show your creditors, the settlement company will try to negotiate a lower amount of debt.
  • Combines all your debts and creditors into one monthly payment.
  • Allows you to pay one monthly payment to the consolidation company, instead of multiple payments to different creditors.
  • You no longer owe your original creditors; instead you pay one monthly payment to your consolidation company.
  • Consolidation companies can help negotiate lower interest rates on your debts and help lower your total debt payment in the long run. A lower interest rate will lower the amount you owe in the end.
  • Allows you to consolidate all your different debts into one personal loan that can be paid off over time.
  • Can offer borrowers a lower interest rate with a longer payback term (compared to high-interest credit cards or medical bills). This will lower the amount of money required to pay off the loan over time.
  • Personal loan debt consolidation can be an effective way to raise your credit score quickly (within 3-6 months).
  • Borrowers can receive funds from their loan within only a few days.

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