Credit is the ability to borrow money. Without credit, many people would not be able to purchase an automobile, unless they had the entire cost of the auto in cash. Credit debt is the unpaid balance on auto loans, credit cards, student loans and any other non-mortgage debt. Over that same 25 year period median U.S. family income increased only 5 percent after accounting for inflation. This increase has far exceeded the very modest increase in real median family income.
Excess borrowing creates high monthly payments, which can strain even a well-planned budget.
The interest cost of credit debt can be very high, even 21 percent per year in some cases. Individuals, families, cities, and nations which have high monthly payments going toward debt repayment often sacrifice financial goals, most notably saving and investing money. Moreover, budgets which are strained by high amounts of debt repayment are less able to deal with crises situations, such as unexpected repairs to a car or home, or medical emergencies. There is no easy way out of excess credit debt. The most obvious solution is to begin a debt repayment plan.