Source: CreditandCollectionsWorld.com and SourceMedia, Inc.
Higher gas prices and other rising household expenses are forcing consumers to use their credit cards more often as they struggle to keep up with their expenses. Credit counselors are reporting a sharp rise in the number of families seeking help. Many consumers are ending up on strict budgets and debt management programs to pay down their balances.
Susan Keating, president and chief executive of the National Foundation for Credit Counseling, said the nonprofit counseling agencies in her organization dealt with a million consumers in 2005, 2.2 million in 2006 and are on their way toward seeing a record 2.8 million this year. Mortgage foreclosure problems as well as pre-bankruptcy counseling have swelled their ranks, Keating said. But credit card debt also continues to trip up consumers. The Federal Reserve reported last week that outstanding credit card debt grew at an annual rate of 4.4% to $920.1 billion in September from $917 billion the month before.
"People are using their credit cards because they don't have enough money to make it day-to-day," Howard Dvorkin, president of the nonprofit Consolidated Credit Counseling Service in Fort Lauderdale, Fla., told the Associated Press. "It's driving the American consumer deeper and deeper into debt."
Through debt management programs, a counseling agency often can get card companies to waive or reduce penalty fees and cut interest rates. At the same time, the consumer agrees to monthly payments that the counseling agency collects and passes on to creditors. The fees for these programs average about $30 a month.
According to David Jones, president of the Association of Independent Consumer Credit Counseling Agencies, nonprofit counseling agencies are seeing a rise in the number of people seeking help, including the elderly.
Some consumers need help creating a spending plan. Others may be able to borrow against their homes and reduce their card debt that way. Still others may need to speak to attorneys about filing for bankruptcy. Those who qualify for debt management plans have a steady source of income - and are willing to cut up their cards and work over the next three to five years to become debt free.