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From debt to disaster

We often consider credit card debt to be a personal problem, but when we start families, what we don't realise is the impact it has on the entire household.

THE latest Insolvency and Trustee Service Australia (ITSA) statistics show that in 2007, there were more than 10,000 women in Australia declaring bankruptcy, with women in their late thirties being the most vulnerable.
While most credit card debts are small and not likely to result in bankruptcy, the nature of debt is that it magnifies itself over time. Reserve Bank of Australia figures indicate the average personal credit card balance of $3300, if left unattended at today's rates of around 17 per cent, will double in about four years.
When debt rises into the tens of thousands, it often takes years to pay off. And what's worse, our children usually inherit our bad spending and money management habits, which can leave a financial scar on the household.
Women are also more vulnerable than men to be unemployed at the time of bankruptcy (52 per cent of women compared to 39 per cent of men), making it even harder for us to get back on our feet.
The reality for most of these women is that being stuck in credit debt can edge them closer and closer towards bankruptcy, and for those with families, the entire household will suffer along side. To avoid this, many women have to enter into debt agreements with their creditors, which is a low-cost, legally binding repayment option which is often a simple alternative to bankruptcy.
Of the women taking up debt agreements, credit debt was cited as the main reason for the cause of their insolvency (39 per cent of women), with women between 15 to 24 years of age at the highest risk according to the ITSA report.
The surprising thing is that the vast majority (92 per cent) of people entering debt agreements are employed at the time, indicating that anyone suffering from bad credit debt can end up coming this close to bankruptcy.
So how do we shield ourselves from ending up deep in debt in the first place?
1. Compare deals online at financial comparison sites like RateCity to help you lower your credit card debt with options such as low-rate balance transfer cards or switching to lowest rate cards can help you save a lot in interest charges.
2.Remain financially independent. If you avoid taking up joint loans or credit cards with partners, you can lower your risk of receiving or "transmitting" debt, and prevent yourself from being left "in the lurch" by partners.
3.Avoid credit debt altogether. Visa and MasterCard debit cards provide an attractive alternative to avoid facing the stress and catastrophe of insolvency, while enjoying the convenience of shopping remotely such as over the phone or online.
Take matters into your own hands, and keep yourself from becoming a debt magnet. We all want the best for our families and children but in some cases, the best and easiest thing to fix is your own mistakes.

Your say: Has debt put strain on your family? How did you deal with it? Email us on openline@bauer-media.com.au

Michelle Hutchison is Consumer Advocate at RateCity.
The above information is general only and does not take into account your objectives, financial situation or needs.

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