FOX26 Houston: Paying off credit card debt in the new year

MMI’s Thomas Nitzsche and MMI client Regine Denerville join consumer reporter Heather Sullivan to talk about paying off credit card debt in the new year as balances and interest rates rise.

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All right, did you put holiday expenses on your credit cards, like most people did? Credit card debt has reached record levels: one trillion dollars nationwide. That's unfathomable, isn't it? Well, the Federal Reserve reports it's young adults who are the ones making the most late payments. Consumer reporter Heather Sullivan joins us with Smart Sense to help you pay it all down - Heather.

Yes, Federal Reserve data shows the average credit card interest rate is now 21%, and Transunion reports that borrowers have an average of more than $6,000 in debt. "I wasn't enjoying life anymore. You know, I wasn't happy about where I was. I wasn't happy with my credit score." Regine Denerville says she struggled to find a job after graduating from college and racked up $20,000 in credit card debt. "What happened was everything became a necessity, um, not just, you know, eating out, but, um, going traveling with friends to cities and going to parties."

She turned to nonprofit credit counseling and Money Management International, which helped her set a budget and pay it all off in 3 years. MMI says it's currently experiencing a 33% spike in clients struggling with credit card debt, particularly over the holidays.

“That's up from about $20,000 at the beginning of last year to almost $30,000 now.”

That's often on top of higher mortgage and auto loan debt and the resumption of student loan payments. Hardest hit are young adults.

"It typically just starts with a budget shortfall, right? Like they're just simply not making enough to make ends meet, which again makes sense if you're earlier in your career."

MMI credit counselors work with creditors to reduce the total amount owed and interest rates and typically help borrowers pay off the debt in 3 to 4 years. “Whether you work with the creditor directly or through a nonprofit credit counseling agency, they're often willing to reduce the interest rates, sometimes really substantially, as low in some cases as 0%.”

Denerville says she avoids debt now, saving up first for purchases. "Stick to my budget of what is actually necessary. So it really helped, um, I had goals that really I looked at every single day and I said, 'Okay, I'm slowly getting to my goals.'"

And she certainly did. So here are some steps that can help you pay off credit card debt: transfer your balance to a 0% balance transfer card. You can ask your lender to reduce your interest rate. LendingTree says 75% who ask are successful getting it lowered an average of 6%. You can offer to settle it for a lower amount if you can pay it at one time or seek help from a nonprofit credit counselor through the National Foundation for Credit Counseling. Lots of resources out there to help you.

Okay, and I think a lot of times you may not realize how deep you are in debt. So what are some warning signs that you need to get some help, and you might not be able to pull it off on your own?

Yeah, you're right, people don't realize it, but if you don't know the total amount that you owe, that's a red flag. Or if you're just paying the minimum every month or you're maxed out, or you often go over the limit on your credit card, those are all red flags that it's time to get some help.

All right, along with maybe Dry January, no-spend January is a trend a lot of people like to get on. Easier said than done.

Thanks, Heather.