Credit Cards An American Way Of Life

Credit Cards, An American Way Of Life Essay, Research Paper

CREDIT CARDS: AN AMERICAN WAY OF LIFE.

April 21, 1999

Kevin L. Thompson

English 201

Amil Quayle

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 mail box 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 is 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 in a spreadsheet program so you can modify the amounts each month.

2. The total amount that you are currently paying (even if it’s the minimum amount) will be

the lowest amount you continue to pay until your debts are paid off. This is your “goal” amount.

As you pay off the balances, the total minimum payments will get lower, but the total you pay will

not.

3. Once you’ve determined the total current payment amount, take the card with the highest

interest rate. If you have several cards that have the same high interest, then choose the card with

the highest balance. This will be the card that gets paid off first.

4. Pay the minimum on all cards each month except for the “chosen” card with the highest

balance. Any difference between the minimum amounts due and the “goal” amount should be

added to the minimum amount due on the chosen card. As that card is paid off, the money you

were paying on it gets transferred to the next highest-interest card with the highest balance. You

will continue to pay credit cards off this way until they are all paid off.

5. If possible, you should try to make your goal amount higher than the minimum amount

due. Even $10 extra a month will help. It is much better to put any extra money you have

towards paying off a card with a 18% interest rate, then putting it in a bank that is only paying

you 3% interest.

6. Take advantage on credit card offers you receive offering a low balance transfer rate.

Watch for promotions offering at least six months of a low rate with no annual fee. You can also

contact your credit card company and ask then to lower your interest rate.

7. Above all else, do not use your credit cards anymore (Popeck).

The hardest part for me was not using my credit cards anymore, I simple cut them up and

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