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Credit Card Debt Still Concern For Americans

Posted By:  |  March 23, 2015  |  0 Comment(s)

Over 24% of Americans owe more money on their credit cards than they have in emergency savings. This is a problem because credit cards charge higher interest rates than savings accounts pay, which makes it even harder for those Americans to ever pay off their debt.

“From a purely financial standpoint, it makes more sense to pay down that high interest rate before you start to save, said Kelly Long of American Institute of CPA’s. “But not having an emergency fallback fund is just a first class ticket to getting further into debt.”

The absence of savings increases the odds that you will need to open new loans to cover unexpected repairs, pushing you even further down that dark hole of debt.

The level of savings in this country is still low with only 58% having more in emergency savings than credit card debt. Even if you don’t have credit card debt most Americans do not have three months worth of savings to cover expenses.

“It’s difficult for people to really move the needle on savings when their income hasn’t grown,” said Greg McBride, Bankrate’s CFA. “Savings is not a high enough priority for American households”.

This is unfortunate since over 63% of consumers said they experienced a major unexpected expense in the last year, such as medical bills, moving costs or housing repairs. Seniors (ages 65 and over) and millennials (ages 18 to 29) were the least likely to have more credit card debt than savings. 73% of consumers with incomes over $75,000 had more money in their emergency savings than credit card debt compared to 48% of those making under $30,000.

It is recommended that you have a savings of six months worth of living expenses in an easily liquidated account. Start out small with maybe $500 or less and setting up an automatic transfer from your paycheck to your emergency fund, if you never see the money it is harder to spend.

With tax season approaching maybe use half of your tax return and put it in an emergency savings account to get started and then use the other half to pay down your credit card debt, it could be a win win.


  • 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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