Photo by RDNE Stock project
Credit card debt in the United States has surged to over $1 trillion, with millions of Americans falling into the dangerous trap of revolving credit card balances. While credit cards can offer convenience, they can also lead to financial stress and wealth disparities, particularly in Black communities.
Here are five things to know about credit card debt and how to avoid falling victim to its pitfalls that ae keeping card companies rich and Black America poor.
There might be legitimate reasons to have a credit card, but in most of the “legit” reasons, credit s can be replaced by cash.
Some reasons that might be good for using credit cards include having them as a backup emergency contingency, but it’s best, say experts, to have a cash savings. Some people use credit cards to build a good credit score, but that is a myth as most credit tracking services will consider the management of bills and expenses as creditworthy, Ramsey Solution reported.
Approximately half of credit card holders must pay off their balances in full each month. With an average credit card interest rate of 20.4 percent, these unpaid balances accumulate, resulting in substantial profits for credit card companies. In 2021, banks earned $106.7 billion in interest and fees from credit card users, AP reported.
Black Americans face unique challenges related to credit card debt. Research shows that Black Americans are less likely to have personal credit cards compared to white Americans, yet they have high debt.
A 2023 poll by The Associated Press-NORC Center for Public Affairs Research found that 35 percent of U.S. adults report that their household debt is higher than it was a year ago. And, about half of Black adults say their household debt has increased, compared with about 3 in 10 white adults, theGrio reported.
The Consumer Financial Protection Bureau (CFPB) reported a 63 percent higher probability for Black consumers to use Buy Now Pay Later (BNPL) platforms than white consumers. The BNPL market is projected to hit $3.98 trillion by 2030; many users are less resilient in the current economic crisis, Black Enterprise reported.
Historical discriminatory practices like redlining have left a lasting impact on communities of color. These practices contributed to wealth gaps and affected credit scores and access to financial products in non-white neighborhoods, Bank Rate reported.
Photo by RDNE Stock project: https://www.pexels.com/photo/man-in-blue-suit-holding-credit-cards-7821900/
