The Birmingham News mentions LowCards.com : Credit card balances on rise, study says
Credit card balances on rise, study says
Average family pays $700 a year in interest
Friday, March 03, 2006
ROY L. WILLIAMS
News staff writer
A survey released Thursday by a Birmingham firm says more families are carrying balances on their credit cards - and the amount they owe is rising to eat up a bigger chunk of a typical family's income.
LowCards.com says 46.2 percent of U.S. families now carry a balance on their credit cards, up from 44.4 percent in 2001. Households also are carrying higher levels of card debt, with an average balance of $5,100, compared to $4,400 five years ago. The median balance is $2,200, up $200 in five years.
LowCards.com, which operates a Web site allowing consumers to compare credit cards, studied Federal Reserve data in preparing its survey.
The study found a typical family's credit card balance is now 5 percent of the annual median family income of $43,200, said Bill Hardekopf of Birmingham's Hampton & Associates, which started LowCards.com six years ago.
Hardekopf said the average household is now paying more than $700 per year in interest on credit cards.
"These households have probably gone through budget shock - as their balances have risen, the interest rates have also increased every few months and the minimum payment percentage has just increased," Hardekopf said. "The average APR (annual percentage rate) is now above 13 percent, so carrying that balance is getting very expensive."
Paying more than the minimum balance due - even just an additional $20 per month - makes a big difference in paring down credit card debt, Hardekopf says. Paying off a $2,200 balance with a 13 percent APR and $55 minimum payment will take more than 14 years and cost an additional $1,500 in interest.
"Increase the monthly payment to $75 and it will take only 36 months to pay off the card and only $461 in interest," Hardekopf said.
Reducing or eliminating credit card debt should be a priority for families who want to move beyond mere financial survival, he said. Another option is transferring your balance to a card with a lower interest rate.
The survey is not a discouraging picture for all families. While 74.9 percent of all families have a credit card, 42 percent of them pay off their card balances each month. "Every person who pays off their credit card in full each month should be using a credit card that gives a rebate or a reward," Hardekopf said.
Hardekopf has been involved in several business ventures in Birmingham and is remembered as the former president of the Birmingham Barons minor league baseball team.
Average family pays $700 a year in interest
Friday, March 03, 2006
ROY L. WILLIAMS
News staff writer
A survey released Thursday by a Birmingham firm says more families are carrying balances on their credit cards - and the amount they owe is rising to eat up a bigger chunk of a typical family's income.
LowCards.com says 46.2 percent of U.S. families now carry a balance on their credit cards, up from 44.4 percent in 2001. Households also are carrying higher levels of card debt, with an average balance of $5,100, compared to $4,400 five years ago. The median balance is $2,200, up $200 in five years.
LowCards.com, which operates a Web site allowing consumers to compare credit cards, studied Federal Reserve data in preparing its survey.
The study found a typical family's credit card balance is now 5 percent of the annual median family income of $43,200, said Bill Hardekopf of Birmingham's Hampton & Associates, which started LowCards.com six years ago.
Hardekopf said the average household is now paying more than $700 per year in interest on credit cards.
"These households have probably gone through budget shock - as their balances have risen, the interest rates have also increased every few months and the minimum payment percentage has just increased," Hardekopf said. "The average APR (annual percentage rate) is now above 13 percent, so carrying that balance is getting very expensive."
Paying more than the minimum balance due - even just an additional $20 per month - makes a big difference in paring down credit card debt, Hardekopf says. Paying off a $2,200 balance with a 13 percent APR and $55 minimum payment will take more than 14 years and cost an additional $1,500 in interest.
"Increase the monthly payment to $75 and it will take only 36 months to pay off the card and only $461 in interest," Hardekopf said.
Reducing or eliminating credit card debt should be a priority for families who want to move beyond mere financial survival, he said. Another option is transferring your balance to a card with a lower interest rate.
The survey is not a discouraging picture for all families. While 74.9 percent of all families have a credit card, 42 percent of them pay off their card balances each month. "Every person who pays off their credit card in full each month should be using a credit card that gives a rebate or a reward," Hardekopf said.
Hardekopf has been involved in several business ventures in Birmingham and is remembered as the former president of the Birmingham Barons minor league baseball team.
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