It's long been known that Chicago has a reputation for a high crime rate, high cost of living, and high traffic congestion. Apparently, we've recently earned another dubious distinction. According to a report in the business section of the Tribune, Chicago is "leading the pack," as the article put it, in defaulting on credit card debt.
The S&P/Experian Credit Consumer Credit Default Indices shows that Chicago residents are less likely than those of any other major city in the US to pay up when balances are due. All that debt applies not just to credit cards, but to house and car payments, too. The article reports that while the nationwide default rate is 0.91, the rate for our city is 1.15. (That means 1.15 percent of Chicagoans aren't paying their debt, versus 0.91 percent of the overall US population).
Financial analysts point to growing confidence in the economy as one of the primary reasons people are racking up more debt. Also, many consumers are facing the fallout of all their holiday spending-- at the same time they're beginning to plan spring or summer vacations.
Credit card companies, unfortunately, are not helping the situation by extending credit to those who can't afford it. Haven't we learned anything from the mortgage fiasco that set off the Great Recession? Subprime lending, in any sector, spells disaster in the long-run.
I'm curious though. How long has Chicago been "leading the pack" in shirking credit card debt? Is this just for 2018? If so, it seems a little early to say that anyone is exhibiting a consistent pattern of not paying off their holiday debt. However, the report does serve as a healthy warning-- one that should be heeded early.
It can be tempting to charge things, especially in January, when budgets sometimes are running lean after the holiday season. Knowing that they'll be receiving their tax returns soon, many people start dreaming about how they're going to spend that money, often planning vacations or some other indulgence. That tax refund may not go as far as we thought it would or some other unforeseen circumstances comes up, like home repairs or medical bills. Meanwhile, we still want to buy the car or take the trip or buy that gadget we had our hearts set on.
But as anyone who's ever been in debt, or been asked to bail a friend or family member out of debt knows, the short-term gratification of instant ownership is far outweighed by the long-term stress of trying to get out of the red. Miss a payment or two along the way and even keeping up with the interest can seem overwhelming. (Interest rates are expected to go up this year, so be prepared to see that reflected on your credit card statements).
So, before you plan that trip to Disneyworld or sign on the dotted line that for brand-new car that you'll be making payments on, think about the long-term consequences. As taxes in Chicago, Cook County, and Illinois continue to go up, it can be more difficult just to make ends meet, so it's wise to keep extraneous spending in check. If it makes you feel better, just remind yourself that you're not emulating the fiscal irresponsibility that some of our politicians are guilty of.
If you find yourself in debt, develop a strategy to conquer it and stay debt-free. One resource that I've found especially helpful over the years is the collection of books and podcasts by Dave Ramsey. You can follow him on social media and read lots of success stories about individuals and families who have paid down massive amounts of debt, even on modest incomes.
And when you make your final payment, you can still reward yourself. just keep it within your means. And you may still be able to take that vacation after all. You may have to plan it during the "off-season" instead, but that's not necessarily a bad thing. Airfares and hotel rates tend to be cheaper at those times, so you can end up spending less that you might otherwise.
Some things that happen in this city are beyond our control. But leading the nation in credit card debt is a trend we can do something about, and quickly. Let's start by paying off old holiday debt before making that next big purchase.
Filed under: News