Serious credit card delinquencies are the highest they’ve been in 15 years, according to recent data from the Federal Reserve Bank of New York. These are balances that are 90 days or more past due.
Understanding the Problem
Certified credit counselors, who spend their days helping everyday Americans dig themselves out of debt, say this number isn’t a surprise. The latest blow has been the spike in gas prices, though costs for other necessities, like housing and groceries, remain high.
For people who turn to credit cards to help make ends meet, costly interest rates can trap them in a cycle of minimum payments. But these payments barely touch the principal debt. Credit counselors advise taking action to manage debt, starting with getting a clearer picture of your debts.
Taking Control
When working with a new client, a credit counselor will review their finances, including any debts. You can perform a similar audit by listing out your current credit card balances, interest rates, and minimum payments.
Determine which debt is doing the most damage. Credit cards with the highest interest rates tend to eat up the bulk of your money, so consider trying the avalanche debt payoff method first. That’s when you pay more than the minimum due on the credit card with the highest rate, while still paying the minimum on your other cards.
If you have a few smaller balances that are easier to wipe out, you can also try the snowball method, or paying off your balances from smallest to largest. This gives some quick wins as you start tackling the debt, which can be especially motivating.
Seeking Help
If you find you don’t have the money to spare, it’s worth getting outside help by reaching out to a nonprofit credit counseling agency and working with a credit counselor. Rest assured, counselors are used to seeing all kinds of different financial situations.
Credit counselors will typically enroll you in a debt management plan (DMP), which lumps your credit card balances into a single payment with a reduced interest rate. Since interest rates are “the most powerful mechanism” keeping consumers in debt, getting the rate down is key.
Original reporting: KTBS 3 (Shreveport) — read the source article.
