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Credit Cards Essay

2304 words - 9 pages

Credit Cards An American Way of Life Credit cards are quickly becoming a major problem for the American people. It is so easy to get into debt with a credit card, and anyone with a mailbox and a pulse can get one. Many Americans can't get out of debt and they run into credit problems; some even file for bankruptcy. The reason it is so easy to use a credit card is that when you use plastic instead of cash, you spend more because you don't emotionally register the pain. If you lay down $50 at lunch, you'll notice if it's a $50 bill. With a credit card, you don't even realize what you paid. The typical American carries five to seven credit cards with an average balance of $1,670 per card (People weekly).Banks are pushing the credit card to consumers in an effort to make money on the interest rates and various fees that can be charged. Since the early 1990's, banks have upped the credit limit on customer's cards by more than a third, and sent out another three billion offers in 1997 alone (Dollars and Sense). The new targets for these credit card companies are the low-income household families. While only 20% of poor families had a credit card in 1983, 40% did in 1995. Their balances were higher than ever, exceeding $1,300 on average in 1995, up $700 from 1983.The reason these credit card companies are focusing on the low-income people is that once they are in debt, they can only afford to make the minimum payment and therefor can never pay off the balance of the credit card. For example, it would take 34 years to pay off a $2500 balance if a person just paid the banks suggested minimum payment. The middle class is also going further into debt. Credit card debt rose 23.5% from January 1997 to March 1998. Sixty three percent of all U.S. households now owe money on their credit cards, and last year they spent $70 billion in interest charges and fees. Credit card debt now accounts for 43% of all consumer loans and is growing faster than all other types of household borrowing, including home mortgages or auto loans. The average household now owes an amount equal to 95% of their yearly income (Dollars and Sense). Credit card companies make it is very easy to get into debt, but almost impossible to get out. The problem being that if you only make the minimum monthly payments (which most of us do) you will never got out of debt. There are many ways to start getting out of the hole and paying off your credit cards. Below are seven steps to financial freedom: 1. It is very helpful to see what you owe on paper. Take a sheet of paper and list the months of the year at the top. List each of your credit cards along the left-hand side and leave a space afterwards for the following items: Payment amount, interest paid, interest percentage and total owed. Under each month, enter the amounts that apply to each card. At the bottom, add up your total payments, total interest paid, and amount owed. What makes this even easier (this is what I did) is to put these items...

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