Job loss. Reduced income. A lingering recession. These are just some of the reasons why credit card debt reduction has been at the forefront of people’s minds. Even without these looming financial threats, looking at credit card debt reduction is a smart financial move. With rates on such credit being among the highest, folks really need to tackle this debt in order to become financially better off.
In terms of interest rates, the trend has been that they are rising. Considering that back in May 2009 the average card rate was 13.94% and today is a full 1% higher, credit card debt reduction is something that can easily curtail the amount of money we spend on our debt.
Rates are not the only reason why we should place added emphasis on credit card debt reduction. In fact, revolving credit cards are often what cause the greatest financial stress on FICO scores (or other credit scoring systems). To illustrate, consider that over 65% of your score will be based on two simple principles: utilization and repayment history.
The fact is that most people can manage revolving credit well. However, when credit card debt reduction is not a priority, people will often use credit liberally. When a personal financial crisis strikes, the borrower will no longer be able to repay the debt and will have to carry a large (often maxed-out) balance. This hurts the credit score because of high utilization. If the crisis is bad enough and the borrower misses a single payment credit will suffer even more.
Nobody likes to look at the negative possibilities, even when we are trying to hedge against personal finance catastrophes. But we have to keep the facts in mind. One, card rates are going up (so much so that the Government is now involved and reviewing putting “caps” on rates). Two, we are living through a tough economic period. Three, credit scores are only becoming more and more popular with the lenders from whom we seek credit. We now have three undeniable reasons why credit card debt reduction should be at the forefront of our financial plans.
It is amazing to hear some of the different reasons people have for carrying a certain amount of debt. And there are as many different reasons as there are to make-money-quick schemes. However, we all share one universal care when it comes to financial well-being and that is how to achieve it. Credit card debt reduction is one such way. And with things the way they are now, it makes much more sense to tackle such debt now before it is too late.
