Credit card debt and you

Credit cards play a major role in the lives of everyday Americans and our overall economy. Electronic payments now account for more than half of all transactions which occur in the United States.

However, the ease of acquiring a credit card along with rising interest rates has led to increasing occurrences of outstanding debt, which ultimately results in financial difficulty.

Over the past 20 years, Americans have grown to use their credit cards as a cash-flow management tool -- looking at them as an emergency source of funds should an unexpected expense occur. Unfortunately, as our economy soured, more and more consumers began turning to their credit cards to pay everyday expenses.

Americans are now approaching $1 trillion in outstanding debts on credit cards, which is the amount carried forward each month by credit cardholders, incurring interest charges. What's worse is nearly half of those accountholders are making only the minimum monthly payment.

The average interest rate on standard credit cards is currently around 13 percent. But for some, interest rates are closer to 20 percent or even higher.

At those rates, consumers only making the minimum monthly payments can find themselves in a very serious situation very quickly.

If you are concerned about your level of credit card debt, there are steps you can take.

The first thing you should do is sit down and make a list of the cards and balances you owe. Make sure to include the interest rate and the minimum monthly payment required, as these are major factors when making long term financial plans. Obtain a copy of your credit report and credit score and study both carefully.

Your credit report is simply a compilation of your bill paying history. Every American is entitled to one free credit report each year from each of the three major credit reporting agencies (Experian, Equifax, TransUnion) and may be requested online at www.annualcreditreport.com or www.ftc.gov/freereports. This is the only government-authorized vendor of each of the three agencies.

In the past, struggling cardholders turned to home-equity loans to pay down credit card debt, which is no longer a viable alternative in the current economic situation. Instead, consumers should look at their budgets and make it a priority to pay off their credit card balances.

Consumers who feel overwhelmed may want to look into local credit counseling services. The National Foundation for Credit Counseling (www.nfcc.org) operates a toll-free number (1-800-338-2227) which will connect a consumer to the nearest local agency office. Private discussions with a credit counselor will not be reported to the credit bureaus.

Consumers struggling with credit card debt have the right to be protected from unfair and deceptive practices by the credit card industry. Like many, I am frustrated by the actions taken by some credit card issuers. However, now is not the time to write off personal responsibility. Congress must make sure any action taken will not impose new costs on our nation's economy or on the very consumers we aim to protect. Nor should it punish those who pay off their credit card bills on time each month.

Recently the House of Representatives passed a bill which would limit credit card issuers' ability to accurately price for risk, which will likely force responsible cardholders to subsidize irresponsible ones through higher fees and less generous reward programs.

Small businesses especially rely on credit cards as a tool for their day-to-day operation and can be forced into dire economic straits when banks will not provide the necessary credit. I opposed the legislation and instead support flexible and balanced regulation to protect consumers without causing serious unintended consequences.

Meaningful credit card reform is a serious issue which warrants careful congressional attention. In the meantime, with the ease of obtaining a credit card too many households are holding a level of debt which could easily cause major financial difficulties. By exercising restraint, families can make responsible decisions and not feel the bite of credit card debt.