Creating a budget can be a challenge but sticking to one can be even harder. For someone who has less than perfect credit, the creation of an affordable monthly budget is crucial.
Consumers who have subprime credit scores, meaning their scores range between 580 and 669 on the FICO scoring model, often struggle with being able to handle a budget that not only meets their needs but actively works towards paying down debt.
Paying down credit card debt can seem like a never-ending struggle. As bankruptcy attorneys, we see credit card debt as one of the most common problems facing those with serious financial challenges. It is not surprising with the high interest rates, unreasonable fees and penalties, and never-ending minimum payments that do not seem to make a dent in the total balance.
According to data from the New York Federal Reserve, the total national credit card debt being carried has hit $14.3 trillion, which represents a 1.1 percent increase from the previous quarter. One of the biggest problems’ consumers face when it comes to credit card debt is paying down a large balance or balances once they are incurred. However, certain tactics have been proven to be successful when it comes to paying off credit card debt.
Although filing for bankruptcy can provide considerable relief to those who are facing insurmountable debt, bankruptcy is not always the best choice for everyone. While some may not qualify for bankruptcy, others may wish to use an alternative solution to solve their debt problems. This is where debt relief programs come in, claiming to help consumers negotiate with their creditors and provide a solution to settle the debt.
However, is it safe to use a national debt relief organization to resolve your debts? While some report positive experiences with these companies, others (many others) have reported negative experiences that resulted in them spending more money in the long run. Also, many consumers have been taken advantage of by debt relief companies that ended up collecting fees without actually providing any debt relief services.
Most Americans have at least one credit card, if not more, that they use on a regular basis. These credit cards can be useful when paying for monthly expenditures, so long as the balances are kept to a minimum and paid in full. Additionally, most credit cards come with fees that make it nearly impossible to pay the card down if the balance becomes too high. According to a 2019 Consumer Reports study, one-third of American credit card consumers say that they struggle with the fees that came along with their credit cards. It is important that consumers be aware of these fees and take steps necessary to avoid them if possible.
Read the Fine Print
One of the best ways to determine what fees come with a credit card is to carefully review the fine print that comes with the consumer’s credit card contract. If any fees will be charged to the card, this information will be found in that fine print.
According to a recent report from the Student Borrower Protection Center (SBPC), student loan debt may lead to additional interest paid on other forms of debt, including credit cards and mortgages. Borrowers may not realize just how much their debt can influence these other payments and may be paying higher prices without even realizing it.
The effects of student loan debt are far-reaching. Approximately 44 million Americans carry a collective $1.6 trillion in student loan debt. Most of these individuals also carry other forms of debt, the most common of these being mortgages and credit card debt. According to this SBPC study, these individuals are also forced to pay up to tens of thousands more in extra costs when purchasing a home or car or even using their credit card.
The coronavirus (COVID-19) pandemic has caused countless Americans to lose their jobs. More than 30 million Americans have filed for unemployment in the wake of the outbreak. Paying for basic expenses can be difficult enough but paying down debt while unemployed can seem impossible.
However, with proper planning and by taking advantage of opportunities available during this time, it can make things a little easier. The first step is to evaluate all expenses coming out monthly and create a budget to see what payments can be made. Additionally, the Coronavirus Aid Relief and Economic Security Act (CARES) provides some relief, as well, that can make this process easier.
Credit card debt has dramatically increased since the coronavirus (COVID-19) pandemic, according to recent data from CreditCards.com. Their data reports that 120 million U.S. consumers, or 47 percent of all consumers, had credit card debt as of April 2020, which is a 43 percent increase from March.
Millennials were hit the hardest with 34 percent of them reporting that they used credit regularly. Experian, one of the three main credit reporting agencies, reported in March that U.S. consumer debt reached a staggering $14.1 trillion with credit cards making up $829 billion of this debt. This level is the highest seen since the Great Recession.
During the Covid-19 pandemic, many Americans have resorted to using credit cards to purchase basic living expenses. With many Americans out of work and stuck at home, this crisis has wreaked havoc on their finances.
Analysts at Bankrate.com estimate that over 110 million consumers entered this crisis carrying credit card debt. A great portion of this debt was already incurred by paying for necessary living expenses, such as childcare and groceries, with credit credits. These expenses also included paying for repairs to cars or homes, as well as emergency medical expenses.
Many South Floridians are finding themselves out of work due to the coronavirus (COVID-19) pandemic. This loss of income can be devastating and make it difficult to continue paying monthly expenses, including credit card debt.
Before the crisis hit, credit card debt had reached an all-time high after the Federal Reserve reported that the fourth-quarter of 2019 credit card debt increased by $46 billion to $930 billion nationwide. It is expected that balances will only increase as Americans find themselves shut in with limited income being earned. Additionally, serious delinquencies were on the rise at the end of 2019, and these numbers are also expected to trend upward, specifically for consumers between the ages of 18 and 29.
Credit card debt is a problem that countless consumers struggle with. But according to recent data provided by Experian, Gen X consumers carry more credit card debt than any other generation.
Experian’s data showed that Gen X holds the highest average credit card balances at $8,658. As members of Gen X approach middle age, many of them raising families, they are also struggling to pay down credit card debt they have been holding since their 20s.
