Credit card debt can quickly spiral out of control. Make a couple late payments – or, even worse, miss them entirely – and your interest rate will skyrocket. Monthly payments that were once manageable can rapidly become overwhelming.
Don’t expect this trend to change any time soon – new data shows that credit card interest rates hit a record high in December. The average interest rate is now 15.22 percent. Debtors with spotty payment histories have rates that are much higher.
These high interest rates don’t seem to be stopping Americans from taking on credit card debt, though. In 2011, consumers collectively added $64 billion in new credit card debt to the nation’s rolls, a significant increase over both 2010 and 2009 numbers.
Credit card companies are certainly complicit in the nation’s debt habit. Many actively target consumers with bad credit, knowing that higher interest rates generate more profit. In the first three quarters of 2011, credit card companies sent more than twice as many solicitations subprime borrowers as they did in all of 2010.
How to Get Out From Debt
If you’re one of the millions of Americans carrying more credit card debt than you can handle, you are probably looking for a way out.
The first step is to take stock of your debts. Make a list of everything you owe, including interest rates and monthly payments.
Next, make a list of all of your expenses. Cut back on anything that isn’t an absolute necessity. Then, direct all your extra income to paying down your debts.
If your credit card debt is so high that you cannot pay it off over a reasonable period of time, you may be a candidate for personal bankruptcy. In a Chapter 7 bankruptcy, the court will liquidate most of your debts, allowing you to start fresh.
Bankruptcy isn’t a quick fix, but it is sometimes the best option for overwhelmed debtors.
Source: The Huffington Post, “Credit Card Interest Rates Hit Record Highs as Companies Market Themselves More Aggressively,” Alexander Eichler, Jan. 4, 2012