When you read the statistics, it is just staggering to hear how much money the average person has in Credit Card debt.  Some reports say the number is $5,000, and other report that it is as high as $10,000.  So why are the numbers so large, why is it that American's are accumulating such a large amount in credit card debt?

  • Hard to track - When you spend money on a credit card it is hard to track how much you spend, until the end of the month when you get the bill.  This makes it very hard to budget as you go along, and leads to spending more than you would like.
  • Ease of debt - The credit card companies make it  so easy now a days to take out a loan to buy things that you can not afford.  They give you a fairly liberal maximum amount, which lets you spend without even thinking that you are taking out a loan every time you buy something.  Years ago when consumers would use layaway to buy something that they could not afford at the current moment, it made it much more of a conscious effort to buy something that was more than the amount of money that you had.
  • Credit Card Company practices - Credit card companies are out there to make money, so they have taken practices which have made it easier for you hold on to the dept, and also added fees which can be very harsh on the consumer.

  So what is the Answer?

  I say, "Go cash, and never go back", and thus fight the urge to use plastic.  We can just as easily put a budgeted amount of cash in our pocket every week, and just use that instead.  This has many advantages.  First of all it is proven that people will spend less money when using cash over credit cards, because people have more of a hesitation and it is more deliberate when it is not a symbolic piece of plastic.  Secondly, this also means that 100% of the purchase price is being sent directly to the merchant, instead of having 2 or 3% taken by the credit card comapnies.  This over the long run reduces the prices of the good and services that we pay for, by taking out the "middle man".  Third of all you will never again spend any of your precious time with the credit card comapny on the phone arguing about what a particular charge is for, and trying to remember if it was yours of not.

  Best of all, at the end of the month, no bill comes in, and you owe nothing, how great does that feel!

Some data from the article taken from the following:

  • Credit card industry facts, debt statistics 2006-2008 (http://www.creditcards.com/credit-card-news/credit-card-industry-facts-personal-debt-statistics-1276.php)