Credit Card Borrowers Feel the Heat

Will someone please get Chris Consumer a couple of aspirins?

His party's over, and he's waking up to the stench of stale beer. He has a creepy feeling he doesn't know the guy snoring under his coffee table. His wallet is empty, and he's got a humdinger of a headache.

Chris Consumer is us. We're a nation about to suffer a serious debt hangover. We've saved little to nothing. Our credit card debt rose nearly 8% in 2007, to a number that will soon round up to $1 trillion. Total consumer debt rings in at a mind-boggling $2.5 trillion.

We can't get our hands on the easy money that fueled the raucous bash anymore, and the drought has exposed a national pandemic of unaffordable lifestyles. Falling home values and tightened lending standards mean we can't tap our homes like ATMs to fill the gap between income and outgo.

It's even getting tougher to abuse credit cards. American Express (NYSE: AXP  ) , Bank of America (NYSE: BAC  ) , and Citigroup (NYSE: C  ) have started reevaluating their existing lines of credit, according to The Wall Street Journal. New credit lines will not be dealt out as freely, and you can expect those late fees to start creeping up.

Now what?
Media reports of a new cultural trend toward involuntary frugality have started cropping up, profiling consumers who realize they must live on the little money left over after payments on the thousands (or tens of thousands) of dollars that they've borrowed over the years.

I'm sure these consumers had an inkling that they could not live on borrowed money forever. Yet the threat of a recession and the evaporation of easy credit have exposed a stark reality: Living on debt makes you vulnerable.

When you carry a lot of consumer debt, you've spent your paycheck long before it reaches your checking account. You're working for someone else all the time. Those debt obligations can grow to crowd out everything else. Borrow enough money, and debt payments can overcome even your ability to pay for necessities.

Next thing you know, you're living paycheck to paycheck, with no cushion to land on in an emergency. You're one paycheck away from financial catastrophe. Lose your job, and you're immediately in serious trouble.

Hot times
No wonder consumers are feeling the heat. As long as they kept borrowing money at a record clip, they could stave off the day of reckoning. Now that the flow is cut off, their paychecks will barely stretch to cover their debts and still buy food, shelter, and cable TV.

They're vulnerable.

They're not without hope, though. Americans excel at the creative thinking that produced novelties like the interest-only loan and securitized mortgaged debt. I have no doubt that another novel debt invention will fill the need for easy money. (I fear our meager retirement accounts might be the next victims.)

But creative thinking can also get you out of debt. You're smart and capable, and you've come to the right place. Hundreds of people like you have attacked their debts and conquered them. Many of them hang out on the Credit Cards and Consumer Debt discussion board offering advice and tough love for other Fools working through their consumer debt.

You also have the opportunity to jump start a new way of life by committing your tax rebate to debt reduction. Get an aspirin, a glass of water, and use this free debt-reduction guide to map out a strategy. You'll feel better in the morning.

Get more help conquering debt:

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