Credit card debt is soaring, interest rates on balances has moved into the 30% range on many cards, and delinquencies and bankruptcies are rising. The statistics are grim as consumers fight to keep up with higher prices, having spent down their pandemic-era savings:

• According to data released by the Federal Reserve, credit card balances increased by $27 billion in the second quarter of 2024 to $1.14 trillion – an all-time record.
• TransUnion says the average credit card balance per customer rose from $5,947 in the second quarter of 2023 to $6,329 in the second quarter of 2024.
• Bankrate.com reports the average credit card rate in September, 2024 is 20.78%. But many store cards now charge as high as 34%, limited only by state usury laws.
• At BanruptcyWatch.com, the 2024 numbers are soaring. Chapter 7 filings increased by 19.6% year-over-year. And Chapter 13 filings, allowing individuals to restructure their debt, increased by 11.46% year-over-year.

In recent months I’ve seen such a huge uptick in debt questions on my Ask Terry blog at TerrySavage.com. Debt problems are increasing says Bruce McClary, senior vice president of Consumer Credit Counseling Services (www.NFCC.org) – the national non-profit umbrella organization for more than 56 trusted community services agencies in every U S state and territory.

He says NFCC has seen a large increase in counseling requests over the past 12 months. In fact, their proprietary “Debt Burden Scale” which is created using their own counseling statistics combined with Federal debt statistics, has risen dramatically.

On a scale of 1-10, the burden was at 3.4 in the third quarter of 2021, and now it is over 6! The report says: “At this stage, levels of household debt make it necessary for significant sacrifices to be made and saving becomes a distant dream.”

McClary says that people are using “all available lines of credit” to fund the gap between their income and basic necessities. While uncovered medical expenses cause a portion of the debt, he notes this is not about extravagant consumer spending. Instead, it is about using credit to make ends meet.

And with higher finance charges, those minimum monthly payments can easily get out of control. Add to that all those “four-easy-payment” plans, which suddenly arrive without planning, and people can be in big trouble.

Get Help Before It’s Too Late
If consumers are having debt problems, you’re bound to see more late-night TV commercials and Internet popup ads touting for-profit debt settlement companies. But here’s a warning: They can often get you into more trouble than you realize.

The “for-profit” model of debt settlement asks you to stop paying your cards. Instead, they want you to send them a lump sum every month, which will build up a pool of cash for them to use in negotiating with your creditors for a reduced-balance payoff. And sometimes it works. At least for a few of your debts.

But in the meantime, your credit is ruined because you aren’t making even those minimum payments on a few of your cards. Once you’re delinquent, your creditors may go to court to get a civil judgement – or even garnish your wages in some states. It’s a quicksand of your own making.

Trusted Credit Counseling
The member agencies of the NFCC provide in person counseling or will discuss your issues over the phone. Reach the nearest local member agency by calling 800-388-2227, or search at www.NFCC.org.
There are several levels of help available. They will go over your entire financial situation as professional counselors make recommendations about adjusting your budget and dealing with your current debt.

Or if the burden is too great, they offer a debt management program. They work with your creditors to accept lower monthly payments, while you send the agency one lump sum every month. The money is distributed to your creditors, who stop pursuing you.

Simple counseling does not go on your credit report, while a debt management plan does get reported to the credit bureaus. But it has less impact than a bankruptcy.

And if bankruptcy is inevitable, the CCCS nonprofit credit counseling agency can answer your questions about the impact, the exclusions, and the entire process. Since consumer bankruptcy – both chapter 7 and 13 – requires debt counseling, you will be one step ahead in the process.

This is the moment of truth about credit and debt. Don’t hide from your debt. Instead, deal with it now, before it gets worse. You’ll be glad you did. And that’s The Savage Truth.