How much credit card debt is too much?

05.07.09
By John Ulzheimer

It's a fairly simple question. How will I know when I'm in too much credit card debt? And how will I know that I need help getting out of it? It's the question that thousands of Americans are struggling with and its ubiquity can lead to under-addressing the issue.

The challenge we're facing is more and more credit card debt. The challenge the credit card industry is facing are more and more defaults. None of us wants to default on our debt, but if it comes down to eating or paying our credit card minimum payments, we choose to eat up rather than pay up. This is understandable and actually answers the first question.

If you have found yourself choosing where your final “extra” dollars are going each month and the choice is between a necessity and a credit card bill, you’re in too much credit card debt. In fact, if you can’t comfortably make your minimum payments each month, I’d also argue that you’re in too much credit card debt. And even some people would argue that if you can’t pay off your credit card bills at the end of the month, every month, then you’re in too much credit card debt.

I’m not sure I disagree with the fact that having ANY credit card debt is too much debt.  When you’re paying someone interest ranging between 7.9 percent and 29.9 percent per year, that’s money that isn’t going into your pocket and working for you. It’s money going into someone else’s pocket that’s working for them. It’s always better to keep your hard-earned money where it belongs, which is at home on your side of the ledger sheet.

If you find yourself in any situation where you are having to move debt around, borrow from one card to pay another, take money from a 401K to make ends meet, stop contributing to a retirement account in order to make credit card payments, or if you find yourself in the red each month because of credit card debt, you have too much debt and need help. In this case your first call should be to someone from Consumer Credit Counseling Services. They may be able to rework your interest rates and fees and/or get your monthly payments under control so you can get ahead of the interest and work down your balances.

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As Americans struggle with debt, credit card defaults rise.