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The perils of being a debt zombie

According to a study from the Consumer Finance Protection Bureau, 55% of credit card balances have revolved for two years or longer. The study also found that 82% of outstanding balances have been allowed to revolve for at least a month or more. When a balance is allowed to linger on a credit card, it is referred to as zombie debt.

Many people are enticed to open an account because of the 0% introductory rate. However, when the introductory period expires, the rate can increase to an average of 15%. In some cases, it can go as high as 28%. Those who carry a balance on their credit cards are more likely to pay for things that they don't need compared to those who pay off their balances in full each month. Examples of luxury purchases include dinners out, online entertainment and high-end clothes.

Individuals who have credit card debt pay $1,600 a year on a cellphone, but it is possible to get a phone for much less. People who have credit card debt also spend about $5,000 a year on a vehicle even if they can't necessarily afford it. The CFPB study found that even people with good credit can become debt zombies and spend money on things that they don't actually need.

If a person is unable to pay his or her credit balances in full in a timely manner, it may be worth considering filing for bankruptcy. In a bankruptcy proceeding, unsecured debts may be reorganized or discharged completely. In a Chapter 7 case, it might be possible to have debts discharged without paying anything to creditors. Other benefits of bankruptcy may include a stay against creditor phone calls and an opportunity to retain property such as a house or a car.

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