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What Virginia residents should know about credit card debt

On Behalf of | Oct 3, 2016 | Bankruptcy

According to one study, the average American household has $5,700 in credit card debt. Furthermore, more than 38 percent of American households have a credit balance of some sort. Those over the age of 75 have the lowest average credit card balance with $5,638 while those under the age of 35 have the second-lowest average debt at $5,808. Households earning over $160,000 a year have an average of $11,200 in credit debt, which shows it effects people of all income levels.

If a consumer had an average debt balance of $5,700 and had an average interest rate of 14 percent, he or she would spend $440 a year on interest. Assuming that it would take three years to pay off that debt, an individual would lose $1,300 over that period of time. In some cases, interest compounds on a daily basis, which means an individual may pay more interest each day that he or she has a balance.

Those who are interested in paying down their credit card debt are advised to pay off the costliest balance first. While paying off the smallest balance may feel good mentally, it may not be the best decision financially. Individuals may also benefit from simply believing that they can pay off the debt as it may provide motivation to start chipping away at their current balances.

Debtors who are seeking relief from overwhelming debt may wish to file for bankruptcy. Doing so may put a stop to credit collection activities as well as allow debts to be discharged immediately or after a repayment period. Those who file under Chapter 13 will repay their debts according to a court-approved plan. An attorney can provide additional details about the bankruptcy process.