NBC Miami: Paying off credit card debt as interest rates rise

MMI’s Thomas Nitzsche and MMI client Ivan Pelaez discuss paying down credit card debt with consumer reporter Alina Machado at NBC Miami.

Transcription:

Still ahead here on NBC 6, interest rates rise for the 10th consecutive time as the Federal Reserve continues to try to fight inflation. NBC 6 Responds breaks down the different options that may help you pay off your credit cards for good.

Welcome back. With the Federal Reserve raising interest rates a quarter percentage point this afternoon, it is the 10th consecutive rate hike. And with interest rates steadily rising over the past year, you may be looking for ways to pay off your high-interest credit card balances. NBC 6 Responds Elena Machado shares a story of a man who was able to pay off over forty thousand dollars worth of credit card debt.

Ivan Pelaez had just graduated from university and was trying to start a new business with family when he started racking up significant credit card debt. “So our credit card bill was about 60,000 spread out across three credit cards.” When the business venture went South, Ivan says he found himself in a difficult situation. "We're making all these really high payments with no income," and, and yeah, no, it was it was a very stressful time." It's why he knew he needed help.

"I just ran the numbers right at some point it just became crystal clear that that when it did find a job I was actually going to be making was not going to be nearly enough to be making these payments which were not even, as I said, reducing the debt that I had."

After doing some research online, he decided to get that help through Money Management International, a non-profit credit counseling service.

"For the average client that we see which carries they carry about $18,000 in credit card debt when they come to us, the interest rate since the Fed started increasing the means about forty-five hundred dollars in added interest if they just make the minimum payments.” Thomas Nitzsche, a spokesperson for Money Management International, says they've recently seen a significant rise in the number of people ages 18 to 29 looking for help. "In the first two months of this year, we've actually seen a two-fold increase versus the same two months last year."

He says if you're looking to get out of debt, you need to avoid making just minimum payments. If you have good credit, consider taking advantage of a zero interest balance transfer offer or a debt consolidation loan.

"The pitfalls there are that of many of our clients we see them do a balance transfer but then they don't get it paid off within that promotional rate period and then the interest rate goes back up and unfortunately, many clients also continue to use the cards that they paid off off. So it's really important to be very careful and to try to limit any spending on credit while you're trying to be aggressively paying off debt."

Ivan paid 50 a month for the service, which negotiated a lower interest rate and set him up on a repayment plan that allowed him to pay off over forty thousand dollars in credit card balances in less than five years. The 32-year-old says he made his last payment of $776 late last year. "Imagine just having almost a thousand dollars overnight just available to you now. I'm fine. You feel like in our position to start, you know, saving." Well, Ivan says his accounts were closed as part of the repayment process, and even though he was worried about how that would impact his credit score, he says now that he's paid everything off, his credit score has made a comeback.

Now we've posted additional information under this story on the response page of our website, nbc6.com. Alina Machado, NBC 6 Responds.