In the article “What Drives Credit Card Debt?” Amy Traub correlates credit card debt to multiple variables. These variables include not having health care, being unemployed, and no assets to fall back on. She continues to state that if a family does not have health care they are 20% more likely to be carrying credit card debt (Traub).As well as an individual that has ever been unemployed is 14% more likely to have credit card debt (Traub).Having credit card debt can be extremely overwhelming. Always believing it can be paid off at any given time, but once it starts it is comparable to a snowball tumbling down a hill. It begins with a miniscule amount and then before anyone knows it, the card is maxed out and believes another card will help. …show more content…
The majority of people with credit card debt is constantly making minimum payments and notice their debt at a standstill. This is due to the interest that the credit card is accumulating and it is absolutely terrible. Credit card debt is usually compared to taking money and throwing it out the window. It is a payment that should not have been there to begin with but now that it is, the credit card user is actually wasting money. After seeing that debt at a standstill, most people will try to pay a little above the minimum payment or make such a drastic payment that they no longer have any money left and go back to using their credit cards. “This ruthless cycle is what makes Americans contribute to over 800 billion dollars in credit card debt.” (Traub) This may seem terrible enough, however, it is just the …show more content…
There are generally two scenarios that a credit score may go. After being in debt scenario one has made all payments on time, but has a high debt to income ratio. The debt to income ratio will drastically lower your credit score, however, at any point the user pays off all their debt the credit score will usually go back to normal. Scenario two would be if the user missed even one payment. If the user is even one month late, the credit score can drop up to 100 points and stay on their credit report for 36 months. Add in the high income to debt ratio and the user’s credit score will be miniscule. Additionally, if at any point the user has a low credit score or high income to debt ratio, they can potentially be denied loans. However, if the user is lucky enough to be approved, their Annual Percentage Rate (APR) will be so drastic the loan will not even be worth it. For example a car loan with a 16 percent APR will cost almost 25 percent extra than the price tag paid for it. Low credit score may not seem important now, but credit score is a crucial part when it is time to search for a new car or
In this country, there are three major credit bureaus: Experian, Equifax and Trans Union. They offer information to lenders about a person�s credit score. The lower your credit score, the less likely you are to get credit. Each credit report comes with �score reason codes� to explain why your credit score is where it is.
Debt is heavy. It sits on your shoulders and weighs you down. Debt is also addictive. It 's easy to throw something on credit when you don 't actually have the money to buy it. It gives you instant gratification, and that can feel good - in the moment. But, for many people, there comes a point where they can 't use their credit anymore and debt is all they are left with. The stress of having to pay it all off can take its toll on your happiness and health, so you must come up with a way to get out of debt and start living a debt free life. Following are two things that will help you get out of debt once and for all.
Credit cards: for some they are the paths to financial freedom, for others they are a necessity for daily purchases. During the recent economic crisis, many have sought out to find the cause. One common suspect is the credit card industry, which is comprised of more than six thousand card issuers (Clayton 209). This issue is debated in the two-part article “Should Congress Regulate Credit Card Rates and Fees?” “Yes” and “No.” Tamara Draut, Director of Economic Opportunity, Demos, argues yes, claiming the credit card companies’ ability to adjust terms and interest rates traps cardholders in everlasting debt. On the contrary, Kenneth J. Clayton, Managing Director of Card Policy for the American Bankers Association, argues no, stating that regulating credit card companies would hinder many people from obtaining credit and further damage the economy. Although both Draut and Clayton present strong evidence for some aspects of their arguments, both writers make assumptions which they fail to support and ignore the complexity of the issue, making their arguments overall unpersuasive.
Late Payments: People do not realize that their payment history can significantly affect their credit score. Every bank or lender provides a due date for making a payment but they also provide a grace period before which the late fees is levied. This is where people make mistakes. They
For debt, it begins with a simple late or missed payment. These missed payments allow companies to punish card owners without discretion. With this, lenders hike up interest and payments on their customers for negligence, regardless of what their reason may be. Whether it was a tough month for the family or someone died and expenses had to be payed, lenders do not care one bit. From 2013 alone, student debt was at 1.21 trillion dollars, and mortgage standing at a whopping 7.9 trillion (Miller, R. K., & Washington, K. (2014). These loans also feed into why we as a country are in debt, which currently stands at seventeen trillion. These missed payments also greatly affect interest rates from lender companies. Companies wait for payments to come late, which allows them to impose fees and hidden charges that must be paid along with the delinquent payment. With increased rates comes...
Credit card debt is one of this nation’s leading internal problems. When credit was first introduced, and up until around the late 1970’s, the standards for getting a credit card were very high. The bar got lowered and lowered to where, eventually, an 18 year-old college student with almost no income and nothing to base a credit score on previously could obtain a credit card (much like myself). The national credit card debt for families residing in the United States alone is in the trillions (Maxed Out). The average American family has around $9,000 in debt, and pays around $1,3000 a year on interest payments (Maxed Out). Many people have the concern today that these interest rates and fees are skyrocketing; and many do not understand why. Most of these people have to try to avoid harassing collecting agents from different agencies, which takes an emotional and psychological toll on them. While a lot of the newly recognized “risky” people (those with a doubted ability to make sufficient payments) are actually older people who have been customers of certain companies for decades, the credit card companies are actually consciously targeting a different, much more vulnerable group of people: college students. James Scurlock produced a documentary called Maxed Out on this growing problem, in which Senator Jack Reed of (Democrat) of Rhode Island emphasizes the targeting of college students in the Consumer Credit Hearings of 2005
The debt will never get cleared up if charges keep appearing on the bill, and even when purchases stop the debt is normally so extensive it takes months if not years to pay off and it can completely plummet a credit score. Also, “College students who are unprepared for financial decision making may make risky decisions such as compulsive spending and debt accumulation. Financial stress impacts both academic achievement and retention.”Stores will try and get many to sign up for their cards and they do this by offering deals. The more cards owned, the more available to spend, which will lead right back into debt. However, a good idea to stay ahead is to pay as much off as much as possible each month. It does not have to be paid in full, but try to at least pay more than the minimum. Debt is all over the world, it 's not just with college students, but with older people as well but college students need to know what debt is good debt and when their limit is before they are drowning in
Some of the arguments in the article say that the reason why people are in debt is because expenses are higher now than they were in the 1970 's. Another argument is that we are living in a materialistic place, especially in California and New York. Everybody wants to look good and have the best, so they use their credit card to make these expenses. Some arguments blame teens for using credit cards. Teens already use credit cards and spend money. Banks and financial institutions are also blamed for the rise in credit card debt because they lower monthly payments on credit cards. Others just think that Americans are comfortable with having credit card debts.
This time period usually begins from the date of your last payment, or when you used your credit card last. From a moral and ethical standpoint, you still owe the debt, and your credit score (FICO) usually will negatively reflect the fact that you have not paid your creditors as you agreed to. But, if a certain amount of time has passed, you may have no legal obligation to pay the money owed. New Form Of Aggressive Debt Collectors A new industry practice has become the norm as delinquent credit card debt has grown over the last several decades.
Unlike people with good or excellent credit scores, individuals with bad credit score are not liable to find approval for a personal loan that easy to come by? The fact that people with bad credit score will not find it easy to secure a personal loan due to
Your score is dynamic and may change every day A Credit Score Affects More Than Just Loans A good credit score, besides giving you better chances of getting a home mortgage, car loan, or credit card you want, also affects
In today’s world young people are using debt to live what they think is the easy life, buying unnecessary items to keep up with the latest trends, partying, and switching from credit card to credit card to pay off racked up bills. In my opinion young people lack the knowledge, and understanding of how credit works, and what it takes to keep up with the responsibilities of owning a credit card. Another reason young people are getting into debt is from college loans. Some students jump from school to school unsure of what career they want to pursue, and some jump from school to school using financial aid to obtain the luxuries they couldn’t normally afford. I think the biggest reason of all for the debt accrued in the early years of adulthood though is irresponsibility. Young people get into debt because they lack knowledge, have many student loans, and are irresponsible when it comes to handling debt.
Bad credit is never a fun problem to have. Especially when it has the ability to ruin your plans of buying a car, a house, or apply for small loans. Most people, however, might not realize that it can also play a role in their relationship or marriage. Marrying someone with a low credit score can lead to multiple problems later on down the road. As a matter of fact, finances can be a major pressure point in any relationship, and debt can be a gloomy cloud that follows you around for years.
This is supported by the study of Hakim and Haddad (1999) which found that the loan repayment obligations related to income and are an important factor in the possibility of default.... ... middle of paper ... ... According to the Credit Counselling and Management Agency (CCMA) (2012), the main reasons people fail to pay a debt were poor financial planning (25%), high medical expenses (22%), business failures or slowdowns (15%), loss of control over the usage of credit cards (13%), and loss of jobs or retrenchments (10%). Therefore, Lea, Webley and Walker (1995) found that debt with economic, social and psychological factors are closely related.
Mortgages, car loans, student loans, and having children, are all situations that can drive families to the overwhelming doom of debt. Debt is mostly overlooked for the simple reason that it may be considered normal. Certain types of debt, like car and mortgage payments, are almost always expected. Debt is sometimes very difficult to evade, especially if money is not managed sensibly. Many families accumulate debt due to overspending, medical bills, and unemployment.