How Does Credit Card Debt Affect a Family?

by Neil Kokemuller

The average credit card debt per borrower was in the United States was $4,996 as of the third quarter of 2012, according to a recent article published in USA Today. In a family, this would equate to nearly $10,000 per couple. Carrying significant amounts of credit card has direct financial implications on families -- as well as psychological and emotional ones.

Cash Flow

Carrying credit card debt means that you have minimum monthly payments of principal and interest. Borrowing now to pay for those great deals affects your available funds going forward. Even if you make only minimum payments, you are out money that could go to other expenses or purchases. If you pay extra to whittle down the debt and minimize your interest burden, your cash flow is even more significantly affected. This holds back families from investing in a bigger home, nicer cars and other quality of life purchases.

Future Borrowing

High credit card debt can also negatively impact your credit rating. This is the score assigned to you by major reporting bureaus based on your payment history, amounts owed, types of credit, length of credit and new accounts. Responsibly paying down your debt is a positive, but being overwhelmed by debt may cause you to miss payments or be late. Late payments usually incur fees and ding your score. High debt-to-limit balances on one or more cards is also bad for your score. A lower score can force you to pay higher interest rates or prevent you from being able to borrow or get a mortgage.

Stress

The stress of dealing with credit card bills each month and trying to come up with funds is a regular burden on couples and families. If you live paycheck to paycheck, you normally have to keep a close eye on how you spend your money to ensure you have enough to at least cover your debt obligations. Falling behind on payments adds to the stress. In a family, the stress is magnified if a couple disagrees on the use of credit cards and financial management. Also, if one family member is largely responsible for the debt, more conflict can arise.

Generational Habits

Kids can suffer when parents carry high credit card debt because of the financial restrictions. However, kids are generally unaware of this unless parents openly discuss their financial matters. Also, the financial habits youngsters develop when they grow up often align with what they observed in the home while growing up. If a mom tended to rely on credit to shop for clothes, a daughter may fall into that patter. Similarly, if a son see his dad use plastic for purchases, he accepts this as normal behavior. Thus, parents usually indirectly teach their kids how to use credit with their own actions. If parents use credit irresponsibly, the lack of responsibility often carries over to their kids.

About the Author

Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.

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