Financial literacy can be a challenging topic for many Americans, particularly as it pertains to credit card use. American society is built on credit, and the resulting debt load can weigh heavily on Connecticut residents. However, the key to lowering debt and avoiding the need for a Chapter 7 bankruptcy filing is to understand how credit cards work, and how best to mitigate the debt they generate.
A research study conducted by a prominent financial website suggested that some 35 percent of Americans with outstanding balances on credit cards only pay the minimum amount as proscribed by their lender. Combined with the 8% who routinely made less than the minimum payment, this accounts for nearly half of all credit card users who are making the same error. A minimum payment simply is not enough to counter debt in most cases.
The minimum payment on a credit card balance typically only covers the interest accrued on the balance, with a minor amount directed toward the principal. This means that it can take years, or even decades, to pay off debt in this way. In the meantime, as a result of the interest, consumers end up paying thousands more than they would have if they paid off the principal only. This is why paying more than the minimum amount is a critical part of getting out of credit card debt.
Of course, for some Connecticut residents, this simply is not possible. Credit card debt can become unmanageable, especially in cases of unforeseen expenditures. In cases like these, a Chapter 7 filing may be the most responsible financial decision a family or individual can make. Filing for bankruptcy with the help of an experienced attorney can discharge unsecured debt like credit cards while protecting property that is exempt by statute.
