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Bankruptcy May Be Your Option

New study reveals causes of credit card debt

Most financial advisors, in Oklahoma and elsewhere around the country, will probably tell you that it is not a good idea to carry a large amount of credit card debt. Credit cards are one of the least desirable types of consumer lending due to high interest rates and expensive fees for late payments, as well as annual membership fees in some instances.

Even so, credit card debt is a big issue across the country. According to the Federal Reserve, consumers nationally have over $800 billion in revolving loans, most of which is credit card debt. Whenever there is such a pervasive problem, it is useful to understand the cause.

Demos, a national public policy organization, conducted a study to try to understand what drives the accumulation of so much consumer credit card debt. The results of the study show that spending habits have no correlation with accumulation of credit card debt.

This may come as a surprise to those who subscribe to the widely-held popular opinion that people with too much credit card debt are simply irresponsible. Instead, several other factors were shown to have a correlation with household credit card debt. Such factors are inadequate health insurance, a period of unemployment, level of education, and value of assets.

These factors really make a lot of sense. Both lack of health insurance and periods of unemployment can cause unexpected expenses that people must find a way to cover, and may prompt them to use their credit cards.

A higher level of education may mean higher income and a faster recovery from a period of unemployment. Higher asset value gives households more options to meet unexpected expenses.

Regardless of how it comes about, credit card debt can become unmanageable. If you find yourself struggling every month to make even the minimum payments, or if you are forced to make hard choices about what gets paid and what doesn’t, your debt may be unmanageable.

If you are in such a situation, it may be good idea to speak to a debt relief attorney who may be able to help you understand your options.

Source: The Huffington Post, “What drives credit card debt?” Amy Traub, May 4, 2014

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