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How ongoing inflation continues to affect the cost of housing, fuel, food and other consumer goods and, in turn, puts a heavier burden on the wallets of millions of people, credit card delinquencies are on the rise, shows a new New York Fed report. According to the latest Quarterly Report on Household Debt and Credit, released on May 14, total household debt in the US increased by about $184 billion in the first quarter of 2024, reaching a total of 17, $69 trillion, and nearly 9% of credit card debt was allocated. delinquent during this time.
What this rise in credit card delinquencies indicates is that more and more Americans are struggling to keep up with their debt payments amid a higher cost of living. And that makes sense, considering the average person currently has one about $8,000 in credit card debt and the average credit card rate is over 21%. Such high rates can cause interest charges to pile up quickly.
So what can you do if you are one of the many cardholders whose credit card debt has he gone delinquent, or will he soon? Well, the good news is that you have options other than falling behind on your payments. Below, we'll break down what you might want to do in these situations.
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Credit card delinquencies are on the rise: 4 ways to pay off what you owe
If you are trying to cope a large amount of credit card debt or you're worried about falling behind on your credit card bills, here are some options worth considering right now:
Lower your interest rate or get new terms with a debt management program
If you're struggling to keep up minimum payments on your credit cards because of the high interest rates, you may benefit from enrolling in a debt management program with the right debt relief company. When you sign up for this type of program, the experts at the debt relief company you choose will work to negotiate new rates or terms with your creditors. If negotiations are successful, lower rates or better terms will generally result in lower credit card payments each month, making it easier for you to pay off what you owe.
There is a caveat, however. You will usually be required to close your credit card accounts as part of your agreements with your credit card companies, so if you plan to use your credit in the future, this may not be the best route But if you can handle closing your card accounts, a debt management program it can be a smart way to reduce the burden of high balances on your credit cards.
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Get rid of some of your balance with debt settlement
Another option you may have in this situation is debt settlement, also known as debt forgiveness. With a debt settlement program, you work with a debt relief expert who tries to negotiate with your creditors to get a portion of your total balance, meaning you'll pay less in total than you owe.
When you sign up this type of programsyou will stop paying your creditors every month and instead make monthly payments directly to the debt relief company (depending on what you can afford). This money will be held in a special account until enough has been accumulated to start the negotiation and settlement process.
If the negotiations are successful, your creditors will receive the agreed settlement amounts. This eliminates your credit card debt, but it's worth noting that it also has a negative impact your credit score, at least temporarily. And, the forgiven portion of your debt is also considered taxable income by the IRS, so that's important to consider as well.
Pay less interest with a debt consolidation loan
If you have good credit and a strong borrower profile, you may have the option to use debt consolidation to pay what you owe. When you consolidate your debt, you roll your credit card balances (and other debts) into one loan, ideally with a lower interest rate. This allows you to pay less interest while streamlining your payments.
You usually have a few different options for debt consolidation, including a debt consolidation loan, using your home equity for debt consolidation or even a debt consolidation program offered by a debt relief company. But whichever you choose, the result is usually the same: a lower monthly payment and interest rate that leads to a lower interest rate.
Start over by filing for bankruptcy
If you find that you still cannot meet your credit card obligations with any of the above options, you also have the option of declare bankruptcy and clean the board. By doing this, you either restructure your debts or have them settled in bankruptcy court. This route can be a way to completely reset when you find yourself in credit card debt.
However, as you might expect, it has some serious ramifications. The main thing is that bankruptcy will affect your credit for an average of seven to ten years, making it difficult to borrow if you need it during that time. Court and attorney fees can too make it expensiveso it should usually be an option of last resort.
The bottom line
Credit card delinquencies are on the rise in today's inflationary environment, and if you're one of the many struggling to keep up with your high-rate debt right now, you may be looking for solutions. Fortunately, you have a few to choose from, including debt forgiveness, debt management, and debt consolidation, and if you find yourself on the edge, bankruptcy is also worth considering. But before you make a decision, just make sure you do your homework, watch for red flags, and take the time to choose the best option for your situation. This way, you can get rid of your debt as quickly and efficiently as possible.
