NEW YORK (MainStreet) — When the Federal Reserve announced earlier this month that credit card debt had risen for the first time in two years, many economists touted it as a sign of recovery. However, Americans may want to charge wisely. Last year, the average personal debt in this country – not counting real estate loans – stood at an astounding $10,168, whereas during the late 1940s and early ‘50s, that average was closer to $2,000.
How do Americans amass so much debt? It’s not the big purchases, Dave Jones, President of the Association of Independent Consumer Credit Counseling Agencies, tells MainStreet.
“It is the impulse buying that really adds up,” Jones says. “It’s not big-ticket purchases. People are very good at tracking those items. They know what they are spending on them.”
But unlike the big purchases, the small ones soon add up, affecting payments on larger loans and creating what Jones calls a “snowball effect.”
We asked our readers to share their financial woes, and as expected, most didn’t end up in debt by taking out a bad loan or making one large purchase. It was a series of unfortunate, often small, events that led to the big money troubles.
Read on and learn by example as these consumers describe how they got in and (thankfully) out of debt.
Debt by Facebook
Will Evangelista joined Facebook to socialize with friends and pursue a few job opportunities, but instead he spent most of his time playing games like Farmville. The games itself weren’t a problem, however, but the credit card bill he racked up from them was.
“I would pay $100 a week to get a special discount on credits,” Evangelista says, explaining that these credits could be used in the game. “Over a two-year period, I charged $10,000 using my mother’s credit card.”