American Credit Card Problems Research Paper

📌Category: Economics, Life, Personal finance, United States, World
📌Words: 818
📌Pages: 3
📌Published: 09 April 2022

There is nothing easier in the world than to go online and signup for a credit card. The United States of America is one of the top countries who uses credit cards with a whopping 632,46 million cards( Riggs). The Total U.S Consumer debt is 3.9 trillion with 41.2% of households carrying credit card debt (Rensendiz). We tend to forget that we’re actually ‘borrowing’ money any time we swipe our cards. Problems such as late payments, poor money management skills,  young adults transitioning into the real world, owning multiple cards & loss of employment can also be the biggest  reasons why Americans are so deep in credit card debt.

When consumers sign up for a credit card, they are pretty much signing up for another bill to be added to the other stash of bills on their coffee table. Credit Card bill payments affect many people because the payments are not paid on time, which will result in late fees. Late fees are added to the minimum balance that’s currently due. The more a payment due date is being missed, the more the minimum balance is increased to where it will make it harder for a person to pay back in a reasonable time. Late payments will also hurt and lower a person’s credit score as well. Poor money management skills also plays a huge part.  If a person is not paying at least  the interest rate, their debt will increase even though they are are making payments. With them paying small amounts of money back, it will take longer for them to  pay the full balance and they will end up paying back more than what they borrowed. If a person spends more than what they earn a month, they are going to eventually fall into a credit debt. Younger adults tend to have become deeper in debt because of this problem.

With young adults transitioning into the real world it may become difficult for them to have a sufficient amount of money. Most young adults find managing their money a little complicated, especially if they’re just starting to earn a salary and having future expenses. 36% of U.S. college students are already more than $1000 in credit card debt (Leonhardt). With them being in college, it may be a little difficult for them to keep a job with work clashing within their schedule, so 9 times out of 10 they don’t have a reliable income to pay back all the money they are spending on the credit card. With college being so expensive and many needs to be met, most students end up adding another card in their name. Study shows nearly 50% of college students have at least 3 or more cards in their name which will possibly increase the average debt (Mae). Having multiple credit cards may be best to a certain extent, but it could also backlash.

It may come a time when a person has to have a sufficient amount of money to pay upcoming and un foreseeing bills, which will lead to them signing up for more than one credit card. Trying to manage the bills, the spending and the credit card balance itself on multiple cards can be difficult and can put them in a bind, which will lead to some penalties. Having multiple credit card payment due dates with different minimum fees can possibly cause a person to miss out on one or more payments and increasing their Annual Penalty Rate (APR), along with the late fees. Just imagine your whole paycheck going towards you trying to catch up on your credit card bills. YIKES!

Most people earn money some type of way by having a job to do. When people lose their job, reality can hit pretty quickly and your financial tasks are in jeopardy. The loss of income/employment is also a factor to the rise in credit card debt. The unemployment rate in the United States rose 0.2 percentage point to 4.0 percentage point with 6.6 million people unemployed(BLS). With that many people becoming unemployed, it became more possible for those people to max out their credit cards.With no job, it’s more difficult for a person to pay back the money spent without no source of income.

For these reasons, it can be very mind blowing how Americans fall so easily into credit debt with just a piece of plastic. One small mistake can lead to a bigger problem , and even a lengthy one. It is very important to read information about credit cards before you sign up for them. It is also important to knock those debts out the way once your’re back on your feet, so you can improve your credit score and get that brand new car you always wanted.

References

Amadeo, Kimberly. “3 Reasons Why Americans Are in So Much Debt.” The Balance, The Balance, 24Aug.2019 https://www.thebalance.com/consumer-debt-statistics-causes-and-impact-3305704.

https://www.finweb.com/banking-credit/what-is-the-average-college-student-credit-card-Debt.html.

“Unemployment Rates for States.” U.S. Bureau of Labor Statistics, U.S. Bureau of Labor Statistics, 16 Aug. 2019,

https://www.bls.gov/web/laus/laumstrk.htmhttps://www.bls.gov/web/laus/laumstrk.htm.

Resendiz, Joe. “Average Credit Card Debt in America: September 2019.” ValuePenguin, ValuePenguin, 15 July 2019,https://www.valuepenguin.com/ave rage-credit-card-debt.

Fry, Richard. “Young Adults, Student Debt and Economic Well-Being.” Pew Research Center's Social & Demographic Trends Project, 28 July 2015, https://www.pewsocialtrends.org/2014/05/14/young-adults-student-debt-and-economic-well-being/.

Leonhardt, Megan. “Over a Third of College Students Already Have Credit Card Debt.” CNBC, CNBC, 3 June 2019, https://www.cnbc.com/2019/05/31/over-a-third-of-college-students-have-credit-card-debt.html.

https://top5ofanything.com/list/47d26caa/Countries-with-the-Most-Credit-Cards-in-Circulation.

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