The recession forced people to stop and think about their personal finances. One area of great concern for those in Florida and elsewhere was credit card debt. For many people, credit card debt led to serious financial issues that were difficult, if not impossible, to overcome on their own. Even with a revival of the economy, some people may be unclear about how much credit card debt is too much or even whether they have a problem to address.
The confusion may stem from not understanding the numbers. People may falsely assume that having a certain amount charged on a credit card may indicate a credit card debt problem. However, the indicator may not be the dollar amount charged, but how that dollar amount relates to the total line of credit available.
An example of the disparity may be if someone has charged $2,000 on a credit card and has a $4,000 limit — they have used half the credit available to them, which is considered a high percentage and not a good place to be credit-wise. Yet, if someone owes more, such as having charged $4,000 on a credit card with a $20,000 limit, they have only tapped into 20 percent of their available credit. This means more credit card debt for one person may actually put them in a better financial category than someone who has less credit card debt.
Handling credit card debt can be overwhelming and confusing for some. Anyone in Florida who is struggling with credit card debt may benefit from gaining a better understanding of their entire financial picture and how that relates to the averages of others. For anyone struggling with any kind of debt, knowing the facts and best options for gaining control of that debt is a beneficial first step to financial freedom and stability.
Source: fool.com, “How Much Credit Card Debt Is Too Much?“, Matthew Frankel, Oct. 5, 2014