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Credit cards and the cycle of debt

In a recent poll, the National Foundation for Credit Counseling found that approximately one in five Americans believe that carrying a certain amount of credit card debt is "a responsible way to manage his or her finances." The results are shocking, as nearly every financial expert would disagree with the assertion in very strong terms.

Carrying credit card debt from month to month is a surefire way to pay more for one's purchases than one might expect. Credit cards can have fantastically high interest rates. Carrying a balance, or worse, adding to it, can make it difficult to make ends meet. Those who find themselves paying only the minimum balance each month often have a difficult road out of debt.

It's a tough lesson for many to learn, as a number of Americans tend to spend more than they make, especially after interest rates and late fees add to the debt load. In fact, this can lead consumers into a nearly unbreakable cycle of debt, as the minimum payments and interest rates stack up, making it harder and harder to pay down the balances in a timely manner. If a sudden, unexpected expense comes up, such as an injury, the consumer may be unable to pay the medical bills.

In this situation, many consumers choose to declare bankruptcy. Bankruptcy allows one to discharge one's credit card debt and start over with a clean slate. It isn't for everyone, though. It's often advisable to speak to a financial expert when considering bankruptcy, as he or she will be able to explain the financial and legal options as they pertain to the consumer's particular situation.

Source: U.S. News & World Report, "How to Avoid Credit Card Debt" Kimberly Palmer, Sep. 25, 2013

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