Local 4 Detroit: Tips to finding the right fix for credit card debt in US
US credit card debt topped $1.5 trillion in 2023. MMI’s Thomas Nitzsche and MMI client Angela Davis join Rod Meloni, CFP® at Local 4 Detroit to discuss strategies to manage and pay off credit card debt in America.
Transcript:
Inflation has been eating away at take-home pay and now a trip to the grocery store is turning a little more painful. A lot of people are using credit cards to cope with the higher prices and that's turning into a real economic problem. Tonight, Local 4 business editor and certified financial planner Rod Maloney is here with a look at the scope of this problem and one way that you can dig yourself out of that debt - Rod.
Yeah, Devon, let's take a quick look at the numbers. The New York Fed says that in 2023, US household debt hit a record high of 17 and a half trillion dollars. And that's mortgages, credit cards, and everything added together. To get a feel for how big that number is, last year's GDP, that's the overall value of the total economy in the United States, was only $27 trillion. And some here are some more frightening numbers too. Last year, US credit card debt topped $1.5 trillion dollars and the per capita credit card number was $20,000. One person who had that kind of debt decided she needed to make a change. She's Angela Davis of Detroit.
“It was more like a persistent underlying stress.” Like many of us, registered dietician Angela Davis did not budget, racked up major credit card debt, and found herself on the minimum monthly payment plan to nowhere. “Maybe one day my bills are $500 this month and the next month they're $600 because of the interest. So like that insecurity of like not knowing how much money I need to pay off the interest, like just became a rat race.” Making little doing an internship during the pandemic convinced her she had no choice and needed to attack her monstrous debt load. A family member told her about Money Management International, a nonprofit credit counseling service, and she's not alone.
Spokesperson Thomas Nitzsche tells Local 4 the line for their services is getting frighteningly long. “We had 5,000 people go through our online counseling portal alone. We also operate a 24/7 call center. Um, so it's really concerning when we start seeing records broken that way.”
Only about 30% of those people end up on what's called a debt management plan. For $25 bucks a month, they consolidate the debt to one lump sum, get negotiated lower interest rates, make one monthly payment to pay off the debt in fairly short order. Also included is a financial education where budgeting becomes the norm. Angela embraced it all and now owes only $8,000 and expects to get to zero by the end of the year.
“I'll say I'm more disciplined now, um, in terms of the choices I make, like the decisions I make traveling, like, you know, some things you got to say no to. I don't need to have fancy elaborate Christmases like buying people all the things they want.”
Now, to be clear, Money Management International is not the only nonprofit credit counseling service. I've recommended GreenPath for years, and there are others, but GreenPath and Money Management International are the two largest. And considering how large these numbers are, there are many possibly facing bankruptcy. So credit counseling is the step to investigate before hitting that bankruptcy button, which you should only do in the most dire situation. We have all of this and more information linked on click on detroit.com so you can do some more reading.
Reporting live in The Newsroom. Rod Maloney, Local 4.
Really helpful information, okay, Rod. We appreciate it.
