Fewer young adults using credit cards, report shows

In a trend that may signal an improvement in the nation's debt crisis, fewer young adults are using credit cards than in the past, recent data show.

According to a recent CNN report, adults between the ages of 18 and 30 are less likely to have a credit card than members of the same age group were less than a decade ago. In 2012, according to the report, 16 percent of 18- to 30-year-olds did not have any credit cards. Just five years earlier, in 2007, that number was only 8 percent.

Despite trend, credit cards are still the norm

Although credit card use is in decline among adults under 30, those without credit cards remain in the minority. Based on the report, most young adults - 84 percent - have at least one credit card, and many have two or more.

While credit card use is not necessarily a bad thing, and in fact can have many benefits if properly managed, credit cards can also put a person at risk of incurring unmanageable debt if they are unable to pay back what they have borrowed. In fact, along with job loss and medical bills, credit card debt is one of the biggest contributors to bankruptcy in the United States.

Compound interest makes credit card debt grow

One of the reasons that credit card debt tends to spin out of control relatively easily is that borrowers often underestimate the effect that interest charges will have on their overall debt load. As of July 25, 2013, the average interest rate for variable-rate credit cards in the U.S. was 15.31 percent, according to Bankrate, and many borrowers pay much more.

Whatever the exact rate, interest on credit card charges typically compounds each month, meaning that the interest is added to the principal. As a result, the interest itself will accrue more interest throughout the life of the loan, which can dramatically increase the amount that the borrower owes.

An example given by Business Insider provides a sobering illustration of credit card interest at work: At an annual interest rate of 22 percent, a borrower who spends 10 years paying off a $5,000 credit card purchase will end up paying $44,235 - nearly nine times the original purchase price.

Bankruptcy may offer a way out of debt

If you or a loved one is struggling with credit card debt that has gotten out of control, you may wish to consider bankruptcy as an option for eliminating debt and starting over with a clean financial slate. To learn more about bankruptcy and whether it may be right for you, contact an attorney with experience in bankruptcy law.