Michigan readers may be interested in the findings of a recent poll regarding credit card debt and savings. The poll showed that 28 percent of Americans have credit card debts that exceed their personal savings and 17 percent have no credit card debt but also no savings. This indicates that almost half of all American citizens have insufficient or no savings, while over a quarter have excessive credit card debt.
An alarming fact that has come to light is that many people use their credit cards as emergency funds. Unemployment and underemployment have had a devastating effect on the finances of many families. The report mentioned the case of a bookstore owner who had been hard hit by the recession. The enormous drop in sales had resulted in some months when the business did not generate enough income to cover the payroll, and her only option was to withdraw cash from her credit card to make up the shortfall. This became a vicious circle, because as soon as she was able to make the minimum payment on the credit card, she would need to withdraw it again for another emergency.
Some financial advisors are of the opinion that the most important action to take is to establish a special savings account and to deposit any available funds into that account. Others figure it is more important to obtain a good insurance package that will cover big emergencies and then start saving for smaller emergencies. Credit card interest rates are typically much higher than on any other debt, but having emergency funds in a savings account will earn interest.
Michigan citizens who find themselves overwhelmed by their credit card debt may benefit from researching available legal options to put them back on the road to financial stability. Individuals may find that their best way forward may be the protection of a bankruptcy to allow them the opportunity to make a fresh start. Having the necessary information available might help consumers make the important financial decisions that will bring about the best outcome.
Source: deseretnews.com, Is credit card debt the new emergency fund?, Michael De Groote, Feb. 28,2014