History of Credit and Credit Debt

The use of credit in our daily lives has become quite commonplace. It allows individuals to make purchases without physically exchanging currency. This practice is not a new concept. Ancient empires, such as Babylon and Egypt, were using credit 3000 years ago.

Although the use of credit is not new it has been refined in modern times. In the 1950. s American Express and Diner. s Club issued charge cards. They billed 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. Only 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.

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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 has also been a great deal of negatives associated with the rise of credit use. These negatives often revolve around over extending one. s credit. The credit industry has been a very lucrative but competitive business. In their rush to gain new customers many companies have made the process of obtaining a credit card very easy. Thousands of "pre-approved" offers are sent out every year. Many people have possession of multiple cards and they do not hesitate to use them. The result is often credit debt. Here are a few important facts:

1. The average American carries monthly credit card balances of $5,800
2. The average credit care interest rate is 18.9% (but can go as high as 23%)
3. On average the typical credit card purchase is 112% higher than using cash

These facts paint a very bleak financial future for those who are not using credit wisely. It is easy to see why personal bankruptcy has continued to grow over the years. However, this 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 as bankruptcy alternatives.

Mark Carney is a professional consultant with First American Debt Consolidation and Loans, a debt consolidation service specializing in financial education, credit counseling, and debt management services nationwide.