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Hot Economy Inflates Credit Card Balances – 4 Warning Signs

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The Federal Reserve Bank of New York reports the average household carries combined credit card balances of $9,600. 

However, a January online poll from the National Foundation for Credit Counseling (NFCC) showed slightly over half (56%) of the respondents carry $15,000 or more in credit card debt in their household, while only four percent declare themselves to be debt-free.

Because signs of trouble can be detected long before minimum payments are problematic, the NFCC offers the following tips to help with early detection:

1. Check Credit Usage – Keep an eye on how and when credit cards are being used each month. If there is an increase in the number of times a credit card is used for purchases that had been covered in the past with cash, it could be a sign that credit is filling gaps in the budget. Instead of charging more often, look for ways to trim the budget to keep expenses in line. Online budget calculators can be helpful toward finding answers.

2. Monitor Available Credit – Each credit card comes with a credit limit, which is the maximum ceiling that a balance can reach before charging privileges are shut down. It is widely recommended to keep a balance as low as possible compared to the limit. This makes payments more affordable and helps avoid running the risk of incurring costly penalties for overcharging. Stay out of trouble by paying off balances as quickly as possible, either all at once or by paying more than the monthly minimum payment.

3. Count Cards – Plastic should not take up a lot of space in a wallet or purse. Federal Reserve data shows that Americans with credit carry nearly four credit cards on average. Most experts advise carrying less than that. It would be a good idea to consider consolidation when carrying more than a couple credit cards. This makes it less stressful to keep track of payments and balances, which helps make debt management easier.

4. Minimum Payments – Making a minimum payment fit comfortably in a budget is not necessarily a sign that debt is under control. It is important to check these key indicators of financial health before the most obvious signs of distress.

The January poll question and responses are below:

Estimating your total household credit card debt, which range below do you fall into?

A. Debt Free 4%
B. $1000-5000 13%
C. $5000-10,000 13%
D. $10000-15,000 13%
E. $15,000+ 56%

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