Put Away the Plastic
The ability to put away the plastic and successfully live on a cash basis is an indicator of financial stability, as it proves a person's lifestyle is in line with their income. However, the recent National Foundation for Credit Counseling® (NFCC) online poll revealed that one in five people could not make ends meet without the use of credit. Another twenty-two percent of respondents said that if asked to live on a cash basis they would have to make significant lifestyle changes.
"Credit should be used as a convenience, not to supplement income," said Gail Cunningham, spokesperson for the NFCC. "It is a warning sign if a person is not able to manage his or her daily lifestyle without the use of credit cards, as this is a dangerous habit that could lead to serious financial distress."
To illustrate the damage that can result from the overuse of credit, consider that in 2013 the average consumer who sought financial counseling from an NFCC member agency had between five and six credit cards with a total unsecured debt equal to half of their annual household income.
"The results of this study do not come as a surprise to the team here at the Consumer Credit Counseling Service of Orange County," said Natalie Lohrenz, Chief Development Officer. "It's one of the first items we discuss with our clients - breaking the credit card chains. Sure, keep one for emergencies, but don't carry it around - literally we ask people to leave it home. It's a fact that people spend more when they use their credit cards, so keeping the card out of sight keeps it out of mind and keeps the bills down."
To help consumers know if they are entering the financial danger zone, the NFCC offers the following red flags that debt is becoming unmanageable:
- Paying only the minimum on credit card bills each month;
- Credit card balances growing;
- Skipping monthly payments, paying late, or making short payments;
- Accounts going into collection;
- Moving debt around through the use of balance transfers;
- Seeking cash advances, payday loans, title loans or other non-traditional credit;
- Arguments in the home over money;
- Charging items that were previously paid for with cash;
- Attempting to obtain new lines of credit since existing lines are near their limit, and
- Considering bankruptcy or debt settlement.
"People may feel as though they have no alternative to using credit to supplement their income, but that is a dangerous habit that can lead to financial ruin," continued Cunningham. "No one ever intentionally digs a deep financial hole, but breaking one of the basic rules of personal finance - spending more than you make - is not likely to have a positive outcome."
For more information, please contact Cheryl Spencer-Borden at 714.245.1675.
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Consumer Credit Counseling Service
1920 Old Tustin Ave.
Santa Ana, CA 92705
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P: (800) 213-2227
F: (714) 245-1680
E: cccsoc@cccsoc.org
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