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Credit card basics: what every consumer should know

Credit cards are widely available these days to anyone who lives in the Nashville area. While millions of people use their credit cards frequently, not everyone has a full understanding of how they work. Credit card use has been on the rise over the last several years, reports CNBC. Credit accounts have reached over $1 trillion, making it a significant part of the debt load held by households throughout the country. Whether just starting out using credit or recovering from past financial struggles, having some basic knowledge about how credit card companies function can go a long way toward preventing future trouble.

According to Forbes, a credit card is essentially a loan from a bank or other lender. Instead of a customer paying for something with cash, the merchant accepts payment from the bank instead. The customer is then responsible for paying the bank back in the future. As with any loan, consumers must agree to terms. Generally, credit card terms state that any amounts that are not paid off at the end of the month are subject to interest.

A look at the financial struggles faced by middle-class families

To those looking in from the outside, it may seem like only people in Nashville who are poor or have very low incomes would be plagued by debt and considering filing for bankruptcy. However, overwhelming financial struggles are increasingly becoming the bane of those who are considered middle-class.

A large part of this stems from a lack of savings, points out the Atlantic. Even those who have what would be considered moderate or high incomes still lack the savings to deal with an emergency or to fund their retirement. In fact, 44 percent of people who earn between $40,000 and $100,000 per year do not have enough to cover an unexpected cost of only $400. This means that many households are only one emergency away from financial disaster.

Weighing your options when dealing with the burdens of debt

If you are constantly dealing with the burdens of debt, you are not alone. Countless individuals have experienced similar struggles at some point in life. Although knowing that others feel your pain might not actually help, you may be able to find solace in the fact that many have overcome these struggles through various forms of debt relief.

Perhaps you have tried a budget, or even tried to cut back on expenses, but with an overwhelming amount of debt, these options may do little to correct your financial issues. You could consider exploring the possibility of filing bankruptcy, as a more long-term solution might be the answer for your current predicament.

Rate of bankruptcy filings is once again on the rise

Reaching the decision to file for bankruptcy is never an easy one for people in Nashville. Many people worry about the stigma associated with bankruptcy but it can also have many benefits. Having debts discharged and being able to start over financially are often well worth it.

Experts have taken a look at the number of people who filed for bankruptcy in May of this year. Compared to the same month last year, it was found that the overall number of filings rose 5 percent. It is not clear what led to this increase. However, efforts are being made by lawmakers to adapt the federal Bankruptcy Code to bring it more in tune with modern times. Consumer filings, as opposed to businesses who filed for bankruptcy, were 66,096 compared to 62,726 the previous May. On average, there were 3,167 bankruptcy filings per day in May of this year.

Chapter 7 versus Chapter 13 bankruptcy

Types of bankruptcy are usually referred to by chapter number. A bankruptcy's chapter refers to the part of the federal bankruptcy code an individual uses to restructure his or her debts and assets. There are several types of federal bankruptcy that people can choose from. A Tennessee bankruptcy attorney can help explain the differences and help individual clients determine which type is right for their needs.

Two of the most frequently used types of bankruptcy are chapter 7 and chapter 13. Here is a brief general explanation of how each works and under what circumstances they can be used.

Disputing the stigma surrounding the bankruptcy process

No one wants to file for bankruptcy, yet it can actually be a positive, beneficial step for many individuals facing insurmountable debt. Bankruptcy is largely misunderstood, and there is a negative stigma associated with walking through this potentially necessary process. From the thought of losing your property to getting rid of debt, you may have many questions and concerns about how it works. 

You always have the right to know your legal options and understand the choices available to you, even if you are unsure if bankruptcy is the right choice for your situation. By reaching out to an experienced bankruptcy attorney, you can get the information you need to make a decision and seek a stronger, more stable financial future. 

What the Federal Reserve interest hike means for consumers

People in Nashville use credit cards for all types of reasons. For some, it is the only way they can afford big purchases such as new appliances, while for others with low incomes using credit can help them with their everyday expenses. Anytime a credit card balance is not paid off at the end of the month, the user ends up being charged interest on any remaining amounts.

According to USA Today, the Federal Reserve recently approved an interest hike that will affect any consumers that have accounts with variable rates of interest. This includes credit cards, as well as adjustable rate mortgages and home equity loans.

What to know about credit card charge-offs

People who are struggling financially in Nashville may find themselves behind on paying certain bills. Since credit cards are considered unsecured debt, meaning there is no collateral tied to it like there is for something such as a mortgage or car loan, they often become one of the first payments that people stop making. When a credit account goes unpaid for a certain period of time, the creditor may charge off the account, according to the Balance.

A charge-off essentially means that the account has been closed. The customer will no longer have access to credit and will not be afforded the opportunity to make minimum payments. In order to prevent the creditor from pursuing legal action to collect the debt, the account would need to be paid off in full.

The role of rewards in the rise of credit card debt

Consumers in Nashville may use credit cards for many different reasons. With the number of card offers out there these days, there is certainly no shortage of types of cards to choose from. The average amount of household credit card debt is on the rise, according to CNBC, and has now reached over $1 trillion. Some are now asking whether efforts by credit lenders to lure consumers in with attractive rewards programs are contributing to this increase.

It seems like commercials and ads for credit cards are everywhere, offering everything from cash back to travel perks. Forbes points out that for those who are able to pay off their balances each month, taking advantage of these incentives can be a savvy thing to do. However, someone who is unable to do so and ends up carrying a balance that costs them a lot in interest over time may not actually be getting any benefit. While the average annual percentage rate is 17 percent, some people may end up paying a much higher rate than that.

A healthier financial future isn't a myth, it's a possibility

Personal debt can come in many forms, each of which can be challenging to overcome. When considering debt, your first thought might lean toward overspending or mismanagement of finances. However, there are numerous factors that can contribute to financial struggles, some of which could be unavoidable.

Perhaps you recently lost your job or had a major surgery, you could be experiencing financial challenges that often accompany a loss of income or unexpected expenses. Although in some cases a person might be able to push through these challenging periods, in others, a long-term solution might be in order.

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Nashville, TN 37212

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