Retail cards have potential to increase credit card debt

Many financial decisions, such as building savings and buying insurance, are based on worst-case scenarios and planning for unforeseen events. Other financial decisions are based on best-case scenarios. These include making purchases on credit at a time when people cannot really afford it, but with the plan that their future income will make it easy to quickly repay the debt incurred. While this strategy works for some Mississippi residents and enables people to have the things they need when they actually need them, the plan can come crashing down if financial hardship arrives. At that point, credit card debt can become very burdensome and stressful.

Equifax has recently released new data that shows an increase in the popularity of credit cards from retail stores. These retail cards are compared with standard bankcards, which consumers are using at the same rate as previously or only slightly more. In 2013, the increase in the use of retail credit cards was over 7%, while consumers used bankcards only .37% more than during the same time period in 2012. The increase in the use of the retail cards may be explained by store promotions, discounts or rewards offered with those cards, as well as the greater willingness of retail card issuers to extend credit to a greater number of borrowers.

When Mississippi residents take advantage of discounts, special programs or low interest-rate offers from retail or bank cards, there can be a range of benefits if the cardholders are able to manage and repay their debts effectively. If tough times strike, however, such as job loss, a reduction in hours or a major illness, there might not be enough money to go around. Consumers may have to prioritize bills, choosing to pay more "essential" ones--like electricity or a mortgage payment--over less essential ones, like credit cards. Unfortunately, nonpayment of credit card debt and delinquent payments can lead to a great deal of stress and harassment from creditors.

For hardworking Mississippians who are struggling financially, bankruptcy may offer a viable solution for financial stability and peace of mind. In Chapter 7 bankruptcy, consumers may be able to completely eliminate credit card debts. Alternatively, Chapter 13 offers the option of creating a three- to five-year repayment plan, at the end of which credit card debts are discharged.

Source: insideARM.com, "Retail Credit Card Grows, Despite Flat to Slightly Rising Credit Card Debt Overall," Nov. 5, 2013

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