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The increasing risk of credit card debt

South Carolina residents may reflect the national trend of carrying increasing balances on their credit cards, which could create financial challenges if the Federal Reserve raises interest rates in the coming months. Experts anticipate an increase of 0.25 percent in September, which would cause existing credit card balances to become more expensive. It is believed that a 1 percent increase would cost debtors across the country a cumulative $9 billion extra each year, averaging approximately $160 per household.

Credit card debt statistics are viewed differently by various U.S. agencies. For example, the National Foundation for Credit Counseling indicates that a high number of Americans are rolling over more than $2,000 on a monthly basis. However, the same agency indicates that only 34 percent of households in the U.S. carried credit card debt during 2014, a drop of approximately 10 percent over a five-year period. The number of individuals paying off full balances each month has increased gradually in recent years as well, but experts suggest that the nearly 30 percent of households doing so is insufficient.

While the number of delinquencies has fallen, this may be attributed to personal bankruptcies. Those who filed for bankruptcy in recent years may not have credit cards at this point. In a Chapter 7 bankruptcy, for example, revolving debt like credit card balances may be discharged and written off. The negative credit impact to a household may last for 10 years, but the credit card accounts would no longer exist. If the national interest rate rises, the increasing cost of credit could push some borrowers to the point of needing to file for bankruptcy.

A family dealing with increasing credit card balances because of rising household costs, unexpected medical expenses, or a job loss might find it necessary to take steps to regain a stable financial footing. Bankruptcy is one approach, but legal advice may be helpful for exploring all options.

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The Huggins Law Firm, PA

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