The American people are drowning in credit debt, possessing a record $957.2 billion in credit card debt at the end of 2007, according to the Federal Reserve. Consumer debt of $11,000 to $12,000 an average household is unheard of. The scary part of the statistic is that the figures are diluted by households that don’t hold any debt. Households that carry over their debt monthly have an average $17,000 in unsecured debt.

Currently, one out of every five households is either late on their payments or has exceeded their credit limit at least once. But these statistics can never reflect the real cost of credit card debt.

Opportunity cost

When people have bad debt they mainly see the tangible costs of the debt, what they see printed on their statements every month. But people don’t examine the intangible cost of debt, opportunity cost. What does that mean? Opportunity costs as they relate to debt are, the opportunities you are forgoing due to debt. The opportunities you forgo are the intangible costs associated with your consumer debt.

The money that goes towards paying off and financing your debt could be used for several things:

Saving Building you wealth through investing Saving for your children’s college tuition Paying for a vacation Down payment for a house Emergency fund Saving for retirement

As you can see the above lists some important lost opportunity costs of maintaining debt.

Costs of Bad Credit Scores

The credit score is key to maintaining financial independence. Good credit scores and credit reports provide great currency for getting preferential treatment in areas of finance, employment, and many others. If you are seeking employment, your credit score can be of huge of influence of you being hired or not.

Employers do perform credit checks to determine if you are a responsible person; a good credit score reflects that. By extrapolating from your FICO score, employers can formulate certain judgments about you that can affect your employment.

Additionally, your credit history affects other aspects of your life. Your financial picture can be improved or reduced depending on your credit report and credit score. A good credit score can save you thousands of dollars in interest rates on your mortgage loan, car loan, business loan, personal loan, or credit card.

It is important to understand long-term consequences of bad credit debt in your life, it is the only way to keep a balanced approach towards credit use, use it with care. Don’t let the high interest credit cards take over and give away your financial independence to credit card companies.

Credit card debt and credit card use has been on the rise in recent years. After so many years, consumers are still at a disadvantage when dealing with card companies, mainly due to laws favoring the companies. Most consumers aren’t aware of their rights, as well as the tricks to deal with the creditors. Discover a few tricks of the trade to steer clear of paying excess credit card fees and make the card companies work for you.

Pay off your Credit Cards

It is advisable to pay off the entire credit debt at the end of the month. This is the best strategy to have one up on the credit card cartel. The first 30 day is an interest rate free grace period which allows you to use their money without paying them anything.

Paying off your cards entirely can save thousands in future continued interest rate payments. Actually, when you pay off your balance you gain the upper hand on card companies because you get a free ride, a 0% short-term personal loan.

This is not a good deal for the card issuer; they are in business for profit. The creditors want consumers to carry their balances month-to-month because they make money on the interest and fees. Credit card issuers dislike “free riders” or “leeches,”” people who pay their balances in full regularly. For issuers, their best customers are the ones who carry over balances while paying on time.

Close the Revolving Door

Revolving credit debt is avoidable. The “revolvers” on average pay high amounts of accumulated interest and fees. Essentially, the revolvers subsidize the activities of the free riders; the free riders pay nothing in fees and interest.

Approximately, 60 percent of credit card users carry over their balances. Carrying a balance is of long-term detriment to you and a boon for card issuers. The high interest rates and their compounding effects work against you.

Avoid Minimum Payments

Don’t fall into the trap of the minimum payments laid out by credit card companies. They are not trying to accommodate your finances but in reality exposing you to financial insecurity, a debt trap. Depending on the credit balance it can take years to pay off your debt.

If you make minimum payments, you will be saddled with double digit interest rates. Basically you are paying down interest not the original balance. Don’t Sign the Check

Avoid signing the blank checks sent to you in the mail. These checks don’t offer a grace period and your high interest starts the minute the checks are used. Just shred the checks as soon as you receive them.

Get the Free Ride

By using these tips, you can keep you finances straight, if not, you might need the help of debt consolidation, credit counseling, or credit consolidation services. Get smart and save bundles of money by following the above tips.

The credit card is an omnipresent financial tool used to support mass consumerism. Consumers in good times or bad use credit cards to make purchases. In the current economy, Americans are placing more purchases on their credit and debit cards which could lead to a steep price to pay in the future.

More and more Americans are racking up credit card debt as they use these instruments to make daily purchases. This alarming trend is a boon for credit card companies who issue the cards; they are flush with profits. However, consumer action could portend problems for them and the card companies in the future.

Short-term credit actions could become long-term problems for the anemic economy and the financially precarious banks that underwrite the risky debt. The US consumer has had their disposable income eradicated as they have to spend more on higher prices for gas and food.

Food and gas are not optional luxury items but necessities. Even budget minded Americans aren’t able to properly save and allocate financial resources. Many Americans can’t perform a proper monthly budget, as gas and food prices keep escalating month to month. They are extending their budgets using credit.

Credit concerns have reached even the Federal Reserve, who is implementing new guidelines for credit companies. Recently, the Fed has been concerned about delinquencies hitting 4.86 percent and revolving credit debt rising by 7.9 percent to $957.2 billion in the first quarter of this year.

Unfortunately, as high-interest debt keeps accumulating, Americans will continue to slide deeper into debt. More debt consolidation, credit consolidation, debt counselors, and credit counseling services will be needed. These services are already aggressively sought out by consumers today; this will only increase over time.

Significant risk exists for people who are putting too much debt on credit cards thus further endangering their financial security. However, if the security of underwriting credit card debt is jeopardized, the economy will decline even further.

Currently, there is a credit crunch to which many financial institutions have already succumbed. Faced with rising foreclosures, loan delinquencies, and credit card debt, banks and other financial institutions have seen their profits evaporate; some are no longer in business.

Herein, financial institutional credit lenders across industries have limited their lending in order to lessen exposure to more risk. The credit crisis is a time bomb in the making, a crisis more severe than acknowledged by the government and the experts.

Credit card debt has been growing in the nation by leaps and bounds. Over the years consumer credit debt has been growing at record levels to reach into the billions of dollars. The average household credit debt is approximately $9,000, and is still growing. Unlike in the past, credit card companies have been charging excessive fees and penalties, and interest rates to consumers. Congress has been slow to reform the credit card industry, as it has been lobbied hard by credit card companies who have vested interests in the status quo. But don’t despair, here are a few things you can do to protect yourself against credit card fees and penalties.

1: Don’t sign up cards with universal default

Universal default (UD) is a financial industry term used for a creditor that changes credit terms from the standard terms to the default terms (i.e. rates and terms provided to those who have missed loan payments) when that creditor is informed that their client has defaulted with another creditor, even though the client has not defaulted with the first creditor.

The UD phenomenon has its roots in financial services deregulation that occurred in the mid-1990s. Today, roughly half of the traditional banks that issue credit cards have universal default language in their account contracts. The controversial practice of UD by credit card companies allows them to raise card interest rates as high as 35 percent, for example, if you make a late car payment to another creditor/lender.

Recently, Citigroup voluntarily abandoned the universal default practice. Sometimes you can’t discover which credit card companies have universal default clauses in their contracts. However, with some research you can find out if your card company includes such clauses.

You can review the “default pricing” section of your credit card contract and see if your card issuer has a universal default policy.

2: Avoid double-billing

This has become another insidious tool used by credit companies to exploit their customers. Double billing is the practice used by credit issuers to calculate interest on their customer’s average daily balance over two months. For example, you have a $100 credit card balance, and you pay $50 by the due date. During the next billing cycle, your interest would be based on the entire $100 instead of only the carried over $50 balance. Even respectable card companies like American Express have been accused of shady double billing practices. Consumers most vulnerable to this practice are customers who carry a balance on their cards.

In order to tackle double billing, make sure you examine your previous and current statement to see if you are being charged double. One clue is to look for the phrase “average daily balance” on your card agreement.

Recently, Chase announced that it would stop double billing its customers.

3: Work around late fees

Congress has only questioned the ethics of dubious late fees and penalties without really doing something about it. Yet, these exorbitant late fee and penalties continue unabated. You can end these fees by setting up automatic bill pay or even advance bill payment. In this manner you can avoid paying excessive fees. However, if you get caught up in an unending cycle of credit debt you might then require credit counseling, debt consolidation services, and/or credit repair.

Without proper federal oversight credit card companies have had a picnic on the backs of their customers. It is time to fight back, Congress won’t do it. So with proper vigilance and more pro active actions you can avoid exorbitant fees and penalties.