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How to Wrangle Unruly Credit Card Debt

How to Wrangle Unruly Credit Card Debt

Two new studies point to a staggering number of adults grappling with crippling credit card debt and no end is in sight.

Ohio State University found that credit card debt amongst young adults seems to be so bad that many may carry debt racked up in their 20’s well into retirement. “If what we found continues to hold true, we may have more elderly people with substantial financial problems in the future,” Lucia Dunn, an OSU professor of economics tells The Columbus Dispatch. “Our projections are that the typical credit-card holder among younger Americans who keeps a balance will die still in debt to credit-card companies.”

A study by Dunn and Sarah Jiang of Capital One Financial examined a group of borrowers based on the amount of debt they held but also how quickly they were able to pay it off. The group found that for people born between 1980 and 1984 credit card debt is $5,689 higher than their parents’ debt would have been at the same age ($8,156 higher than their grandparents’).

“They will go to their graves with credit-card debt,” Dunn said. “It does raise some concern about where we’re going with credit-card debt in this country.”

The younger generation isn’t the only group falling into the perils of credit card debt. Demos’ 2012 National Survey on Credit Card Debt of Low- and Middle-Income Households concluded that middle-aged and older Americans are carrying more credit card debt on average than younger generations.

This study points to older households carrying an average credit card balance of $8,278 in 2012, noting that those under age 50 had an average credit card debt of $6,258.

NBC Nightly News reported that 18% of consumers nearing or entering retirement will need to tap into retirement savings in order to pay down credit card debt.

According to both surveys, nearly no generational group is left unscathed from credit card debt. What can you do if you find yourself on the hamster wheel of making monthly minimum credit card payments with no real plan to pay off debt?

Four Ways to Reduce Credit Card Debt Struggle

Some basic, no nonsense ways you can reduce your debt and pave your way back into the black is to control spending and consider a lower interest rate credit card.

1. Transfer Balances to a Credit Union Credit Card

Why transfer to a credit union card specifically? Credit union loans are capped at 18% so borrowers know they will never be charged a higher rate. Plus, many credit unions offer no fee credit card balance transfers.

Michigan State University Credit Union ($2.25 billion, East Lansing, MI) states on its website, If the current interest rate on your credit card elsewhere is 16.9%, you'll save over $1,600 in interest alone on a $2,500 balance by transferring it to an MSUFCU Platinum Visa with our lowest available rate!

Plus MSU Credit Union does not have a balance transfer fee, which frees up more cash. Other credit unions offering no fee credit card balance transfers include Hanscom Federal Credit Union ($1 billion, Hanscom AFB, MA) and Star One Credit Union ($6.2 billion, Sunnyvale, CA).

2. Walk Away From the Credit Cards

Amy Allen Clark, founder of told Redbook that her family stopped using credit cards five years ago and finally paid them off last year. Her family accumulated $13,000 in debt when her husband lost his job--making the minimum payment each month on a 21% rate was stretching her family budget. She says that by transferring the balance to a 3.9% card and throwing the cards in a drawer, she finally found her way back to financial freedom.

3. Check Your Statements

Identify theft has unfortunately become a common occurrence, providing a gateway for thieves to rack up credit card debt in someone else’s name.

Forbes reports that at least 10,000 identity fraud rings exist in the U.S., with many being run by friends, neighbors and even families. Even though fraud protection can offer cardholders some peace of mind, credit card holders should comb through statements every month to ensure that you aren’t covering thieves’ purchases.

4. Track Your Progress

Turn monthly payments into a game by creating a chart and tracking the amount you contribute each month toward your goal (of paying off the card). Visually seeing your progress each day can motivate even the most apathetic consumer as it allows you to keep your goal front and center.

If you feel as though credit card debt is beyond your control, contact your credit union for help and advice about debt management or consolidation programs.

By Gina Ragusa
Published January 18, 2013
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