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Credit card debt outweighs savings for many

A recent survey conducted by Bankrate.com is in the news after it showed that only 51 percent — the lowest in the survey’s history — of respondents had enough cash saved up to pay off their credit cards, and these numbers likely hold true for residents of New Jersey as well. More than 30 percent of Americans said that their credit card debt was larger than their savings, and 17 percent did not have either any money in savings or in credit card debt.

The personal savings rate in the United States is also continuing to drop. According to the U.S. Department of Commerce, the savings rate came in at 4.2 percent in November of 2013. The lowest rate was in 2007 at just below 3 percent. The low savings rate and the significant percentage of Americans who have more credit card debt than they could pay off if needed are a result of long-term unemployment, stagnant incomes and high household expenses, according to the chief financial analyst for Bankrate.com.

The lingering effects of the 2013 holiday season are likely also a factor, as consumer debt increased at a rate of 3.3 percent in the final quarter of last year. The amount of disposable income did not increase proportionately, so it seems likely a fair amount of people used credit cards to cover holiday spending.

With recent studies showing that the 44 percent of households in the United States have less than three months’ worth of savings tucked away, those that have high amounts of credit card debt may be struggling to pay the bills. Overwhelming amounts of debt can affect every aspect of a person’s life — financially, emotionally and mentally. Filing for bankruptcy to eliminate credit card debt may be one option to get back on track.

Source: CBS News, “Close to half of Americans have more credit card debt than savings” Constantine Von Hoffman, Feb. 18, 2014

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