Americans can choose among plenty of options to pay for things they need or want, but for convenience and safety it's hard to beat a credit card. With a credit card, you don't have the hassle of writing a check. If your card gets lost or stolen you can get it replaced, and in most cases, your liability for any unauthorized purchases is limited. On the downside, credit cards make it easy for Americans to accumulate debt.
Households With Cards
If you are like most Americans, you have at least one credit card in your wallet. An ABC News report estimates 75 percent of Americans possess a card. That doesn't mean all of these people are awash in credit card debt, but 44 percent of households that own a credit card carry a balance. CNN Money pegs the average balance at approximately $15,950 as of 2012.
Cost of Doing Business
Credit cards are a major payment medium for American consumers, in part because of their convenience. You don't have to carry a lot of cash, and you can pay for all of your purchases with one payment. Many credit cards offer a grace period, but if you don't pay your balance in full by the due date, you'll be charged interest, probably in the double-digits. The average interest rate on credit cards that carried a balance was 12.81 percent as of November 2012, according to the Federal Reserve.
The Federal Reserve estimates outstanding consumer revolving debt at $849.8 billion, as of December 2012. Around 98 percent of that revolving debt is from credit cards, according to Consolidated Credit Counseling Services. The average debt per credit card borrower for the second quarter of 2012 was $4,971, according to CNBC.
Dealing With Debt
Credit cards offer both safety and convenience, but not all credit cards are created equally. Some cards might offer a longer grace period but have a higher interest rate for unpaid balances. Others might offer a low interest rate but have a shorter grace period. Using a card with a longer grace period for purchases that you plan to pay off immediately gives you greater flexibility with your financial resources. Using a card with a lower interest rate makes sense for larger purchase that you need to finance. Paying off higher interest rate cards first will save money in the long run.
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