History of Credit and Credit Debt
The use of credit Ancient dates back 3000 years to empires such as Babylon and Egypt. It has become quite commonplace to make purchases without physically exchanging currency. Although the use of credit is not new, it has been refined in modern times. American Express and Diner's Club issued charge cards billing customers the full balance on a monthly basis and charged annual fees for this service. One year later Diner's Club issued the first credit card so that a portion of the total balance was required to be paid monthly. The remainder of the balance would remain on the card and accrue interest.
There are many advantages associated with the modern credit system. It makes carrying large amounts of money unnecessary. It has increased the convenience of commerce through shopping mediums such as the internet, television and catalogues. Funds are more readily available in emergency situations. And in some instances a valid credit card is an effective form of identification.
However, there are disadvantages associated with the use of credit and the most common is overextending or the inability to pay for the debt created. The credit industry is a very lucrative, but highly competitive business and in the rush to gain new customers, many companies have made the process of obtaining a credit card very easy. Hundreds of "pre-approved" offers are sent out every daily via the mail or internet and most people possess multiple cards and they do not hesitate to use them. The result is often credit debt and the average monthly credit card balance in the US is $5,800, with an average credit card interest rate of 18.9% and average the typical credit card purchase is 112% higher than using cash.
Personal bankruptcy has continued to grow over the years but the situation is not inevitable and there are preventative measures that can be taken. For those that are already in this situation there, are corrective measures that can be explored including, credit counseling, debt consolidation and bankruptcy.