According to BusinessWeek, “the next horror for beaten-down financial firms is the $950 billion worth of outstanding credit-card debt-much of it toxic.” Credit card debt is unsecured, meaning consumers don’t have to make down payments when opening up their accounts. The average debt in households with one credit card is growing. According to MSN Money, “more than a third-36% - of those who owe more than $10,000 on their cards have household incomes under $50,000, according to the VIP Forum analysis, 13% who owe that much have household incomes under $30,000. The percentage of disposable income used to pay debts is still near record highs and the median value of total outstanding debt owed by households rose 9.6% between 1998 and 2001. Bankruptcies set another record in 2003, with 1.6 million personal filings, the American Bankruptcy Institute reports.
Banks are more willing than ever to cancel your credit card debt, but that doesn’t come with repercussions. The non-payment will stay on your credit report for years, bringing your credit score down dramatically. If you are on the brink of bankruptcy, you should approach your credit card company and ask if you can pay less than the full amount or even less than the minimum.