The whole subject of personal finance has been under the microscope in recent decades. Borrowing money has been a way of life across most of the developed world. There is nothing wrong with taking out loans that applicants are able to pay back of course. The USA has arguably led the way in living on credit with the recent recession a clear expression of what was wrong. People were too comfortable with debt and lenders far too complacent when looking at whether to approve. It was real estate and toxic mortgage lending that created the recession, but it highlighted a problem of equal if not more concern; credit cards. Their initial benefit for the consumer was convenience.
They became a serious burden for many people with multiple cards who were able to build up significant debts. Some users didn’t realize they had a problem. Others thought they could always move the debt on. However, the day of reckoning came and many had no solution.
Credit Card Circulation
The number of credit cards now in circulation in the USA is still very much a cause for concern. Anyone that sits down and recognizes they are losing control of their financial situation should explore the possibility of taking a term personal loan to clear their credit card debt. Interest rates are extremely high on outstanding balances; the rope may be tightening around their necks it is time to seek help.
Used properly credit cards are great. When the monthly statement comes in it should be paid in full; no interest is charged at that point though there may be charges for ATM use. Cards are convenient and remove the need to carry a wallet full of notes. Bonus and reward points often mean that people using credit cards properly come out ahead. Even if they are lost and stolen the costs involved are minimal.
But what is the downside for those with credit cards?
- If you have too many you are likely to spend more than you would otherwise. Do you really need all the things you are buying?
- Introductory rates may not tell you the whole picture. You need to read the small print.
- You may find that some you have taken are very uncompetitive when it comes to charges, fees and interest rate.
- If you merely make a minimum payment each month you will scarcely reduce your balance once interest is added.
- You are more likely to accept the statements without examining them closely for mistakes.
- You can exceed a credit limit once you become under more pressure; even more charges will result.
The US Economy is improving by the month. The unemployment rate is falling to a level similar to the growth period before the Collateralized Debt Obligation issue resulted in the problems on Wall Street and subsequent recession. Consumer confidence is returning, interest rates are low and job security creates an environment where credit can be seen in a positive light. It is not credit as such that is the problem. It is how responsibly people approach their personal finances.
Mortgage loans that finance real estate are fine because during the term of a mortgage the rise in the value of the real estate should far outweigh the costs involved in taking out the mortgage and paying it off in full. Federal student loans tend to be at good rates and their conditions are less strict than most. Other installment loans need careful thought but that is not to say there are not very positive reasons for getting a loan that is competitive and meets a need. Affordability is a key component in every decision about finance. Even people who were not thinking about taking out a loan should be aware of their monthly income and expenditure, not just happy that there is a surplus at the end of each month. There are stages in life where financial priorities change. As people get older they should ensure their retirement provisions are keeping pace. Health and insurance are subjects to consider on a regular basis and it is surely worth having an emergency fund? That fund is unlikely to be able to pay off core debt built up on multiple credit cards so it is better to ensure responsible use in the first place.