As credit card debt increases for many Americans, Arkansas residents may be interested in some of the drawbacks of allowing balances to mount. Credit card companies give customers disclosures that talk about financial terms and give many numbers. However, they do not disclose the side effects of relying on credit cards to make purchases or carrying a balance from one month to the next.
The first side effect is that using a credit card essentially is like creating inflation. Last year, the U.S. inflation rate was only two percent. But by charging items to a credit card and not paying the balance at the end of the month, a person ends up paying substantially more for the same item. Thus, buying power is decreased. Using credit cards to pay for things a person cannot afford can lead to an increased lifestyle expectation. When the time comes to downgrade, many people find themselves more upset than they would have been if they’d lived the lower lifestyle all along. Having debts can also make a pay cut or a job loss more severe. People who used cards to get by until their incomes increased might suddenly find themselves facing a credit card lawsuit.
Large amounts of debt can also slow economic growth. Mathematically, the more money spent to pay past debts, the less is available to meet future needs. A family that spends most of its income to repay debts has less funds available to save or put toward future goals.
When credit card debts mount, a bankruptcy attorney may be able to help negotiate settlements or consolidate debts into an affordable payment. Alternatively, the attorney can advise if bankruptcy would be the best option to help a client obtain relief.
Source: Fox Business, “The Side Effects of Credit Cards“, Richard Barrington, June 05, 2014