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How Credit Card Debt Affects Families and What Can Parents Do About It

Credit Card swiping
Image by Ahmad Ardity for Pixabay

Today, at least 15% of American households are living their means, spending more than what they earn monthly and out of these, as many as 43% are using credit cards to finance their expenses. When you consider the very high APRs that credit card issuers charge, it means that a very large number of people are seeing their debts spiraling out of control and affecting their future. According to thebalance.com, the usual credit card debt per American family was $8,402 in May 2019. A quick look at how families are impacted by high levels of debt and what parents can do to resolve the problem:

Strained Cash Flow

Credit Card Debt

When a family carries significant amounts of credit card debt, the minimum amount due every month can be a huge drain on the finances. Even if they are making only the minimum payments every month, a lot of that is towards the interest component and represent good money that they could have used for purposes that are more productive or essential. If you decide to pay a little more than the minimum due, then your cash flow is even more negatively impacted and could very well prevent you from enjoying the quality of life that you desire and compromise on large expenses like children’s education, medical treatment, a better car, or even a larger home.

Ability to Access Additional Credit

When the parents have high debt exposure, it will lead to a negative impact on the credit score. Not only is the score decided by taking into account factors like the amount owed, the regularity of payment, previous defaults or late payments, the credit type, and the duration of the credit but also the total credit utilization ratio of your cards and lines of credit. Not only does a late payment drive down your credit score but also invites a steep penalty that can add to your financial distress. When your credit score is driven down by the impact of debt, getting loans will become more difficult and you will not be offered the best of interest rates, which will drive up your cost of capital.


Tracking multiple credit card statements and scrabbling around to raise the money to pay the minimum monthly dues every month can be a very stressful experience for couples caught in a debt trap. Failing to make the payments for a few months can get the account turned over to collections and then you would end up being chased by debt collectors all the time. When this happens, not only does it result in social embarrassment but also can be responsible for rifts within the family that can have very serious repercussions on the marriage and how children react to the situation.

Lack of Financial Responsibility by the Next Generation

Not only do the children suffer because of the lack of cash due to high credit card debt but also they tend to copy the very same lifestyles and spending behavior of their parents when they are adults. Thus when the parents use credit cards irresponsibly, they are teaching their children to follow suit later on.

Debt Consolidation Can Be a Solution to Credit Card Debt

cutting credit card

If your household finances have got unstuck due to high credit card debt, waiting for a miracle to happen is unrealistic. Rather, as responsible parents, you should immediately find out the extent of the debt and explore what you can do to resolve the issue. Of all the available methods of debt management, debt consolidation is perhaps the most effective if you are determined to make it work. There are quite a few ways parent can consolidate their credit card debt. A quick look at the various options:

Balance transfer: Often credit card issuers offer zero percent balance transfer promotional schemes to attract new customers, however, you will only be able to avail of one if you have a good credit score. By transferring all the other balances to the new card, you will be able to save a lot. You need to be aware of the impact of the transfer changes and complete the repayment within the promotion period.

Personal loan: Parents who are unable to bear the burden of the credit card debt can take out a loan from a bank or a private lender to settle their card balances. Banks give the lowest rates of interest; however, their application processing is very detailed and bureaucratic. Private lenders, on the other hand, are extremely competitive and quick to process applications and disburse the loan. However, parents will need to be careful about choosing the right lender because the rates vary a lot and there are quite a few companies who are unreliable.

A 401(k) loan: Parents can borrow a maximum of 50% of their contribution to a 401(k) plan if their company rules permit. The payment will need to be done within five years along with interest of around five percent. While the loans are easy to take out, since it is own money that you are borrowing, however, you can end up compromising your post-retirement financial security in case you don’t repay the money. In case of defaults, you will also be liable to pay taxes and penalties as the IRS would deem the loan to be income.

Home equity loan: You can also borrow against the equity you have in your mortgage. Since the home acts as collateral, the rate of interest is low, however, if you default on the repayment, you can be left homeless, a situation, which no parent will ever want to put their family in.

Loan against life insurance policy: A parent can consider taking a loan against a life insurance policy and use it to pay off the credit cards. However, if you are not able to pay back the loan, you will have compromised the cover of your life insurance policy and the financial security of your family, so unless, the need is extreme, such a loan should be avoided.


High credit card debts can be extremely worrisome because they threaten the financial security of your family besides causing stress, reduce your ability to take more credit, and restrict your ability to enjoy life. Debt consolidation is a practical method of getting rid of high-cost debts and bringing back financial freedom into your life. For more details you can visit NationaldebtRelief.

Bio: Isabella Rossellini is a marketing and communication expert. She also serves as content

developer with many years of experience. She has previously covered an extensive range of topics in her posts, including business and start-ups.