KPRC2 Houston: Two easy ways to wipe out credit card debt

MMI’s Thomas Nitzsche and MMI debt management plan client Amber Canedo join Bill Spencer at KPRC2 Houston to discuss paying down debt as record-high interest rates challenge American households.

Transcript:

All right. If you are living paycheck to paycheck and with the cost of almost everything we're buying skyrocketing over the past few years from homes to cars, food, insurance it's really no surprise that Americans credit card debt is soaring.

In fact the average credit card balance has jumped 46% in the last 3 years. A lot of families are sinking deeper and deeper into debt, so this morning investigator Bill Spencer has two brilliant ways to tackle that debt and wipe it all out without paying a fortune in sky-high interest rates.

Amber Canedo looks over her bills on the computer. She works in the financial services industry working with money, and yet even she fell into a canyon of credit card debt several years ago.

“We were about $29,000 in debt and then when you look at it and it's just like, oh wow, there's there's no way that I can personally just get out of this much debt.”

Amber and her husband are not alone. Credit card debt in the US has shattered all records.

“In total, Americans owe $1.18 trillion on their credit cards.” Ted Rossman's a credit expert with Bankrate.com. “On an individual level, according to TransUnion, this works out to $6,360 per person. If you make minimum payments towards that average balance you're going to be in debt for more than 18 years.”

So the big question is with credit card debt skyrocketing, what's the fastest, cheapest way to wipe it all out and not pay a fortune and interest?

“My favorite tip is to sign up for a 0% balance transfer credit card. You can get a 0% balance transfer card for up to 21months. Examples include the Wells Fargo Reflect, the Citi Simplicity, and the US Bank Visa Platinum.”

Okay, but once you get that card how are you supposed to use it? I'm about to show you.

So let's just say you've racked up $5,000 in credit card debt on five different credit cards. Well, to wipe all that debt out now, you’re going to take take that entire $5,000 and you're going to transfer it onto a 21 month 0% balance transfer card. But the thing is you're going to have to pay a $250 service fee to make that balance transfer happen. So we're going to take $250, we're going to add that to the $5,000 and we're going to wind up with a new debt total of $5,250. Now we take our total debt and we divide it by 21 months and we come up with $250. Meaning if we pay $250 bucks every month for the next 21 months we're going to completely wipe out our credit card debt and you will have done it all paying 0% interest rate on that balance transfer card.

“Moneymanagement.org…”

But at almost $30,000 in debt, Amber and her husband needed a lot more help digging themselves out. So they actually contacted a nonprofit credit counseling agency Money Management International.

“The really crucial part for us was they reach out to all of your creditors and they negotiate to lower your interest rates so that your debt can be paid off faster. They worked with us to determine the amount that we could pay per month and got us on a payment plan.”

“So we simply work with the creditors to reduce the interest rates and consolidate the payment into one. [It] helps keep you organized, helps keep you on track, and on average they get out out of that debt within 4 years."

“So this month we're going to be focusing on paying off the Visa bill…”

And guess what: it took Amber and her husband 3 years, but with Money Management's help that $30,000 debt is completely gone.

“You realize what a giant thing it is you did?”

“I do, I do. It's amazing that we are able to accomplish this and we're really happy.”

And one more important thing, make sure if you're going to go to a credit counseling agency that it's a nonprofit credit counseling agency like the one we mentioned in our story. That is a critical point.

And if you're going to apply for a 0% balance card, we have Ted Rossman's top three picks for the best 0% cards on our website along with this entire story.

I'm Bill Spencer, KPRC2 investigates.