PIC Current

Raise your hand if you have over $1,694 of credit card debt. If so, do you feel alone? By now you probably don’t, and perhaps rightly so.

According to a recent report, $1,694 is our average credit card balance. This figure has risen steadily over the last few years to go along with an increasingly turbulent economy. In today’s increasingly difficult financial climate, it simply is not advisable to carry large credit card balances. And if you do, your credit card company might permanently raise your interest rate for a late payment, for closing a separate account, or even just because they felt like it!

Don’t believe this could happen? It has been recently reported that many credit card companies can raise your rates based on your overall debt level. For example; if you recently bought a new home and you already have outstanding credit card debt, the rate on your card may increase simply because of your new mortgage. And of course the higher your interest rates go, the more difficult it will be to get out of debt unless you aggressively pay the outstanding balance down. This is happening to many Americans. It seems like only a short time ago when everyone was using plastic for everything whether it was for financing a new laptop or to pick up a $1.75 cookie at Starbucks. Those days are now over.

The cure for debt is becoming increasingly more difficult to find. People are returning to school in the hope that with an increase in education they will see an increase in their income. However, higher education is expensive and another common way of collecting more debt. Many students use credit cards to supplement their income while earning a degree, believing that they will be able to pay it off after they finish school. This can be wishful thinking. By the time a person graduates, they’ll often be further in debt than when they started.

What is the solution? Perhaps we simply need to be extra cautious and wait out the economic storm for now. There have been plenty of other difficult times when jobs were scarce, and there is reason for optimism as the value of the dollar is beginning to show signs of improving. Consumers should consider that the more they save now, and the less debt they take on, the better their condition will be when the economy gets healthier.

If that means shredding your credit card and taking a weekend job, then so be it. You will be in better shape when things improve.