Eye catching headline: “Is America Charging Too Much on its Credit Card”. I’ve managed credit policy, collections, and acquisition areas for major banks and there are some recent themes that indicate a brewing credit management storm.
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If you continue to run a balance on your credit card every month, eventually your overspending will catch up with you. Collective interest charges will send you into a debt spiral – where you can’t even pay off the accrued interest, much less the debt itself. You simply can’t continue to spend more than you save every month.
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You may respond, “Why not? America does it all the time!”
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You’d be right – America has been in deficit spending for most of our lifetimes. Since World War II, when the deficit shot up to 29% of America’s Gross Domestic Product (GDP), there have been only seven years where the government ran a surplus – and four of those years were in relatively recent times (1998-2001).
We Each Owe about $170,000
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The current national debt – the summary of all of our deficits plus the accrued interest – is over $20.6 trillion dollars. That’s a bit over $170,000 for every U.S. taxpayer. Ready to pay your share?
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The real trouble begins if America is ever in a position where creditors believe that we may not fully pay off our debts as a nation, or that high interest rates are required to cover our risk.
As for our family budget, we certainly use credit cards and rarely carry cash. But we rarely roll over balances. I sleep better when I don’t pay 18% interest!
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
Read the quoted story here