How to permanently cut that credit card debt

To most of us, our credit score is a lot more important than educational ones. We only truly care about what the databases have on record about our purchases and consumer choices. Today, we can buy instant affluence but can as quickly lose it, and be threatened by foreclosures and bankruptcies. Consumer debt, of more than $4 trillion, is currently one of the biggest problems in the economy, of which above $18,000 is the consumer credit card debt per household.

What is worse for you and I, is that interest has to be paid. As a result, an estimated 60% of American families spend more than their after-tax income. Nearly 32 million families run with an annual deficit of $8 thousand on average, exhausting their savings and carrying huge debts. It would take little to push them into bankruptcy, a few months without work or a reduced income. In twenty years America has become a credit card nation and a debtor society where the seeming affluence, apparent rise in standards of living are all financed by debt and not by income growth. Consumer credit card debt has become the new epidemic.

If you are one of these people, facing a financial crisis caused by illness, loss of work, or overspending, remember that it is not impossible to overcome. The situation can be brought under control, with dedication and hard work, teamed with sacrifices.

Consider your options. You can choose from a self created realistic budget or credit counseling from an organization, decide between debt consolidation, and bankruptcy, or you may consider debt negotiation. The best option would depend on your accumulated debt, capacity for self discipline, and prospects for the future.

Basic steps like budgeting can be self help. Your local public library will have information about budgeting and money management and computer software programs are easily available and make good tools for maintaining a budget, planning debt repayments and savings. Credit counseling and debt management are a good if you can’t stick to a budget, or fail to work out a repayment plan with you creditors. You can also choose to consolidate your debt, but remember that you have to put your home up as collateral. In the event of any future inability to pay or any late payments, you could lose your home to foreclosure.

Most people know, and understand, that overspending along with credit card debt leads to trouble. There are psychological reasons for the popularity of credit cards. Credit cards create what is called a cognitive disconnect, a vast gulf between what Americans buy and how much they can afford. When you don’t pay with cash, you don't understand the real cost. You cannot connect it with the hours of work it took to make that money. Paying with plastic is just like not paying. With buy now pay later systems, credit cards make you feel able to afford anything, paying for it over time. For most purchases, you are still paying it off a year later, and it has cost you 20% more than the price with the interest you have paid, added in.
The current state of the credit card based economy has taken away the notion of a buffer, an emergency fund. People don’t put anything away for crisis times, putting everything on their credit cards whenever there is an emergency. They are paying for these emergencies for longer and longer times, sometimes dragging it into their retirements. Also, since they have practically no savings to speak of, and no investments, they enter retirement totally dependent on the state and their own kids.