For the past several years, credit card debt interest rates in North Carolina have been at historic lows. Interest rates are kept low by the Federal Reserve Board. It is their way of helping stimulate the economy. Consumers see low interest as an opportunity to secure a “good deal” that might not be available in the future. This encourages people to borrow for big-ticket items such as cars and homes. The problem is, it is usually borrowed sooner than they would normally need it. Unfortunately, the borrowing of money almost always precludes its saving. And once you add a credit card and other consumer debt into the mix, many people find themselves in financial distress.
North Carolinians who suffer from debt are not alone
Fortunately, debt-riddled North Carolinians are not alone, and not without resources. Nearly everyone has had problems with debt at some point in their lives, and North Carolinians are no exception. The average North Carolina resident has $7,225 in credit card debt alone. This is in addition to other forms of indebtedness, such as mortgages, car loans, student loans, and medical debt. Many people are overwhelmed by the demands of their indebtedness. This gets them sucked into a downward spiral. They end up feeling the stress of their financial problems and it goes on to affect every area of their lives. Financial problems top the list of reasons cited for divorce. The pressures that ensue from having too much debt and not enough money harm relationships at home, work, and in the community.
How credit card debt happens
Admittedly, people get into credit card debt for different reasons. The circumstances leading to the debt are as different as every individual. Often, it is a combination of events that cause the problem. This includes the loss of a job, illness, an emergency, or simple lack of financial literacy. The latter is not really a crime but it can lead to debt and is far more common than many people imagine.
Debt attacks some people when they become ensnared in addictions – like the empty but seductive promise implied by lottery ticket displays and online poker websites. Most of the time, debt accrues quietly, insidiously, and without much fanfare. Eventually, the day dawns when a person, at last, realizes that they’re in a serious financial predicament.
For some, student debt eats up available income
Many young couples begin their married lives under a cloud of student debt so great that the numbers and what they represent seem surreal. When they run short of cash at the end of the month, they simply whip out their credit card. After all, when you already owe so much, what’s a little more credit card debt? Right? These small purchases inevitably add up, one after the other. To make things worse, it is added with compound interest that’s compounded. What works for you when saving money does the opposite when you borrowed it. Add to that scenario a job loss or unexpected car repair. You are suddenly on the wrong end of an accelerating snowball of debt.
Senior citizens: vulnerable to scams and medical expenses
Older folks commonly find themselves strapped by medical bills. When they are unable to pay, they too, are apt to reach for their credit cards when they find themselves in a pinch. One type of expense the majority of senior citizens is apt to encounter is that of rehabilitation services, assisted living costs, and possibly, long-term care for themselves or their spouse. Many seniors live on a fixed income and struggle with medical care costs. They also struggle with the cost of living, which rises faster than their income. Sadly, some senior citizens are vulnerable to financial exploitation by unscrupulous acquaintances and family members.
The cost of living factor
Sometimes you’ll hear a person wryly refer to having more month than money left before their next paycheck arrives. It’s difficult to live on a fixed income or a strict budget when the cost of living is continually rising. According to reports, the cost of living will rise even higher in 2018. You can thank inflation for that. Interest rates, when kept artificially low, affect the rate of inflation and cause prices on goods and services to rise.
North Carolina falls near the middle in rankings of cost of living, but it is not a cheap place to live. Housing costs are slightly below the average national cost of housing, but cannot be considered inexpensive. Furthermore, costs vary considerably from urban to rural counties. Also, the cost of food and healthcare, which are essential, are priced above the national average. When people find themselves unable to afford these necessities, they frequently turn to their credit cards for help.
Unemployment and the lack of suitable employment
The rate of unemployment in North Carolina as of November of 2017 (the latest date for which statistics are available) was 4.3%. This figure offers two possible interpretations. One indicates a lack of employment opportunities. The second interpretation is that those without jobs are unqualified for the jobs that exist.
When Congress passed the North American Free Trade Agreement (NAFTA) in 1994, concerns about job losses in the manufacturing sector eased with promises of better, higher-paying jobs in technology. The unfortunate reality is that not many who lost their jobs when their factories moved or closed were qualified to work in the tech sector. As a result, North Carolina, a state with a long legacy in textile production and manufacturing, suffered more than many states. Some go so far as to argue that it has yet to recover.
A financial maxim that resonates with most people on some level is the one about needing to have money to make money. It is a largely true maxim. Generally speaking, it is as difficult for a person to embark on a productive career path without support as it is to start a new business without capital investment. It is easy, therefore, to understand how it is that so many North Carolinians are up to their ears in credit card debt.
Debt relief options
Specific options exist to provide the relief to those struggling beneath the crushing weight of too much debt. Some people have the option of borrowing from friends or family, or of taking out a second mortgage against the equity in their home. However, assuming that a person chooses not to borrow from friends or relatives, against robbing a bank, and does not wish to use endanger his home’s equity, his available options available are debt consolidation and debt settlement, which differ greatly from one another despite their similar sounding titles. Both schemes share the goal of providing debt relief to affected individuals.
Debt consolidation is a type of debt management. It involves taking out a new loan to pay off smaller credit card and consumer debt accounts. These are usually the ones that demand payment to arrive each month like clockwork. While debt consolidation doesn’t reduce the amount of money owed, it does provide a more efficient way to manage the debt. The consolidated payment is lower than the total of the combined payments one was formerly paying and has a lower interest rate. Instead of having numerous credit card bills arriving at all times of the month, there is but one to anticipate and pay. With just one payment to remember, it is easier to avoid being late. You do not have to worry about excessive fees and increased interest that penalize individuals with late credit card payments.
Debt settlement offers consumers the opportunity to reduce the level of their overall indebtedness by negotiating with creditors to lower the amount owed. It is a good choice when one is already in arrears, has little or no credit, and has nothing to lose. Those who are still creditworthy may wish to consider any future borrowing needs that they anticipate having, such as for a house or car, before heading down this path.
Debt settlement is not possible until one is behind on his payments by several months. Only after the debt one owes is thought to be potentially unrecoverable will the credit card company consider settlement offers. As you wait for your accounts to go into collections, your credit score tanks. Debt settlement may indeed be the right financial solution for some, but it is important to understand the consequences and risks involved.
Lessons learned from credit card debt
Debt is stressful and can be overwhelming. According to a survey, half of Americans with debt admitted that it affected them negatively. But despite that, it is also conquerable. Many times, the primary prerequisite to financial freedom is to change the bad financial habits. It is important to avoid the behaviors and circumstances that led to a debt consolidation loan or debt settlement in the first place. A person who consolidates or reduces his debt only to immediately begin running up his credit card balances anew is a person asking for financial ruin.
Use debt management opportunities as a means to escape the tyranny of debt and cut up those troublesome credit cards so you’ll not be tempted to use them. Promise yourself you’ll do what it takes to conquer the debt habit once and for all. Once you’ve made a firm commitment, you might be surprised to see how readily the pieces to the debt-free puzzle fall into place!
If you really want to get out of your credit card debt problem, you might want to start spending less than what you are earning. Here is a video that discusses that further.