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Small changes in spending patterns can bring positive results

With over 50 percent of Americans with credit cards carrying balances over each month, it's easy to see why there's a major consumer debt problem.

The Urban Institute conducted some research that revealed effective ways to assist consumers with making better fiscal decisions. These rules of thumb are guidelines based on common-sense principles intended to intervene at the point when consumers make the decision to purchase something. They are:

-- "Don't swipe the small stuff. Use cash when it's under $20."

-- "Credit keeps charging. It adds approximately 20 percent to the total."

Credit card revolvers received these messages via online web banners at log-in points, e-mails and calendar magnets sent snail mail. The control group didn't get any of these.

While the results were moderate, they were cost-effective and a good way to modify consumer spending patterns. Those recipients of the first rule, on average, had $104 less revolving debt half a year later. They had balances that were 2 percent less than their baseline averages at a cost about four bits per individual for delivery.

The second rule had less of an overall impact, but those younger than 40 who were its recipients had a decrease of $160 in debt. Both rules had more of an effect on those 39 and younger, as those who got the first rule carried $173 less of revolving debt.

When attempting to modify spending patterns, it's always best to implement those that are least expensive. But sometimes these minor changes won't be enough to dig consumers out from under a staggering mountain of debt. If that is the case in your situation and your credit card debt has gotten out of control, it might be time to bite the bullet and consider filing for bankruptcy.

Source: Urban Institute, "An Evaluation of the Impacts of Two “Rules of Thumb” for Credit Card Revolvers," Brett Theodos et al, Sep. 08, 2016

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