Credit Card Debt Can Be Bad for Your Financial Health

[Feb 5, 2008.]

 

Many Americans carry thousands of dollars in credit card debt. Indeed, some turn to credit cards to finance their lifestyles when they are struggling with student loans, adjustable rate home mortgages, and other debts.

But financial experts in 2008 are saying that credit card debt can be disastrous for your financial health.
To begin with, you can't deduct credit card interest on your tax return. As a result, credit card debt is less desirable than a mortgage, whose interest you can deduct.

In addition, the things you generally buy with credit cards are depreciating goods, meaning that they are losing their value. For instance, if you buy clothing with your credit card, chances are if you re-sell it, you will be taking a loss on it. You can therefore amass a great deal of debt with a credit card without gaining any wealth. You have no asset to pay off your debt, so you can easily end up having difficulty making ends meet.

Credit card use can also lead to credit card abuse. When you abuse credit cards, you wrack up huge amounts of debt without any hope of paying it off. If you find that you can only make the minimum credit card payment each month, you may be a credit card abuser.

The Federal Reserve reports that total credit card debt in the U.S. amounts to approximately 800 billion dollars. The average interest rate on credit cards is in the neighborhood of 13.5%. This means that a number of credit card companies are making a great deal of money—at the expense of consumers.

If you have already fallen into heavy credit card debt, financial experts say there is hope for recovery. If you begin an aggressive repayment plan now, you may be able to avoid paying a great deal of money in interest charges later on. The sooner you emerge from credit card debt, the better off you'll be, financially-speaking.

Julie Ann Amos
Febraury 5th 2008

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