For years utilizing credit cards has been encouraged on various levels in our society. Retailers encourage you to apply for credit by offering you an in store markdown on your purchases for that day. In other scenarios they offer to give you the fulfillment of the purchase right now and the option to delay the payments until later on. Creditors encourage the use of consumer credit to fund that vacation or to pay for the kids braces.
The ease and flexibility offered by the credit card industry made these suggestions very appealing indeed. Many consumers have experienced the tremendous benefits of easy credit. There is also a a down side to this picture that comes in the form of excessive credit card debt. In fact recent studies based on a 2010 report by the Federal Reserve indicate that the average balance owed by consumers is nearly $14,500. When you examine these numbers over the years, these outstanding balance numbers have been steadily increasing.
There are two basic directions from which this challenge of excessive credit card debt can be handled. At an industry level, greater consumer instruction needs to take place in regards to the proper handling of consumer credit. While education can raise the public understanding the issues, the response of the industry has to go even deeper. One solution would be stiffer approval standards for would be credit card holders. This might include such things as pre-requisite financial management and budgeting programs. An additional solution could be the development of truly “personal” lines of credit. Whereas most credit lines have product based limits, this type of arrangement would set limits based solely upon the proven creditworthiness and stability of the borrower. Once a card is issued lenders need to be looking to implement early warning criteria based on the spending habits, usage and payment history of the borrower. Whenever the patterns presented by a borrower indicate the potential for accumulating excessive debt, the company would then restrict the account and require further education and demonstrated stability to reopen the credit line.
The second approach to confronting excessive credit card debt occurs on an individual level. A borrower needs to have a household budget in place before ever using consumer credit. This budget will allow the borrower to know their cash flow position each month and quickly evaluate whether they are getting too deep into debt. Ideally, the borrower would want to set up their household budget to ensure that, that they can pay off their outstanding credit card balance each month. Developing discipline is significant if a borrower is going to stay clear of the difficulty created by having excessive levels of consumer debt.
For those already overwhelmed by runaway personal credit card debt there are debt settlement options available. These could include such resources as credit card litigation or consumer credit counseling.
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