Why Are You Still in Credit Card Debt?

By Alan Olsen
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Do you have any credit card debt? Chances are if you own even one credit card the answer is yes. And if you’re like most people, then you probably have several cards with each one carrying at least some balance. In fact, more than 120 million Americans have at least some credit card debt, with the average amount per household coming in at $8,448. That number alone is staggering, but when you consider the amount of interest the average person is paying, the numbers are even more mind-blowing.

Fees Compound the Problem

Consider the fact that the interest rate for the average credit card is 14 percent, according to the Federal Reserve, which means the average family could easily spend more than $1,000 each year just on the interest alone. That is a huge portion of a person’s income going to waste. Everyone knows that debt is bad and that paying interest fees is essentially throwing away money. So why do so many people continue to get into so much credit card debt? And why doso few people seem to be able to get out from debt once they fall into that trap?

Create a Plan

In order to get out of debt, you have to live by a budget. A set budget will help you live within your means. You should also set a target date for when you want to become debt-free, and stick to it. It’salso a good idea to reward yourself as you reach certain milestones along the way to becoming debt-free. But don’t add further debt. Onceyou’ve created your plan you have to live by it. Millions of people start the process but they don’t achieve their goal. For many, it’s because they continue to make the same mistakes that keep them in debt.

Avoid These Common Mistakes

One of the most common mistakes people make is getting their budget wrong. The problem is many people consider and calculate their budget by looking forward instead of back. It’s important to learn from the past in order to understand how to manage your budget going forward. Another big mistake people commit is making decisions based on emotion instead of common sense. If you can’t afford your car payment then sell it and find something more affordable. It’s a no-brainer but it can be difficult for someone who is emotionally attached to his or her vehicle.

Automation Works

Another mistake people make is by passing automation. When you set your payments to be withdrawn automatically you won’t ever miss a payment. You’ll also likely avoid the temptation to spend the money you have set aside for your credit card bill, somewhere else. Lastly, don’t try to borrow your way out of debt without setting a budget and changing your spending habits. Balance transfers and consolidating debts can be effective tools for getting out of debt but if you haven’t corrected your spending habits first then you will most likely continue to spend beyond your means and end up in even worse debt.