End the Vicious Cycle of Credit Card Debt
Bills. com cites 5 ways to achieve personal financial freedom now.
San Mateo, Calif. (PRWEB) July 25, 2007
American consumers who are bold enough to take a mid-summer pulse of their personal finances may find more debt than ever before. American families owed a total of $895 billion on credit cards at the end of May (Source: Federal Reserve) -- and Bills. com co-founder and co-CEO Brad Stroh reports that Americans must take steps now to end the vicious cycle of debt.
"Debt has become a growing problem, and many Americans need to find a solution. With uncertainty about the future of housing prices, the high cost of oil, and record hikes in health care and higher education costs, many people are on the precipice of financial disaster. Americans are playing with fire by maintaining an average credit card debt load approaching $10,000 per household (Source: CardData. com)," Stroh said. "At the same time, the stock market is at record levels, but most Americans cannot benefit from this potential prosperity because they are crippled with debt. For those with debt, now is the time to tackle it."
Money Smarts Slump
With an estimated 8 billion credit card offers going to mailboxes to lure Americans into debt last year ((Source: CardWeb. com), consumers are managing their money less responsibly than ever before:
U. S. consumers racked up an estimated $51 billion worth of fast food on their personal credit and debit cards in 2006, compared to $33.2 billion in 2005. (Source: CardData. com) Just 18 percent of credit card debt is paid off each month. (Source: CardData. com) Since the early 1980s, personal saving as a share of disposable personal income has dropped from a range of 8 to 10 percent to a negative 1.3 percent over the past year. (Source: American Enterprise Institute for Public Policy Research) The U. S. personal savings rate has been negative for eight consecutive quarters, reaching a 73-year low. This means Americans are dipping into their savings to make ends meet, rather than accumulating savings. (Source: U. S. Department of Commerce) At the same time, personal spending in the United States jumped in December 2006 by the highest amount in five months. (Source: U. S. Department of Commerce)
"The great news is that no matter how serious the situation - no matter how much an individual owes or why - it is possible to achieve freedom from debt," said Stroh. "Eliminating debt can be very challenging, but it changes people's lives forever. By ending the vicious cycle of debt, people truly become free and in control of their lives."
5 Steps to Stop the Cycle
Stroh's company, Bills. com (http://www. bills. com), is a free online consumer portal that provides personal finance education and resources to help individuals manage their finances. To stop the cycle of debt, Stroh suggests individuals take these actions:
1. Learn the basics of personal finance. Everybody can find a style of personal financial management that suits them. The Internet (at sites like http://www. bills. com) is loaded with free information. Most importantly, Stroh said, a system that makes sense will be easiest to use.
2. Make a spending plan. Bills. com offers a free guide to personal finance that details how to create a spending plan. The guide is available at http://www. bills. com/guide. "Each month, plan how you will spend every dollar you earn," Stroh suggested. "You'll know if you can have some 'fun' money one month -- or if you need to be especially cautious. A budget is a great way to gain the freedom of knowing you are in control."
3. Pay secured debt first. Payments were behind on 4.56 percent of credit card accounts in late 2006 (Source: American Bankers Association), and foreclosures are tripling in some parts of the country. Consumers should remember they are in the strongest financial position when they pay secured debt first. Secured debt is a loan for a tangible object such as a home or car. If individuals do not pay these bills, they risk losing the object through foreclosure or repossession, with a major impact on their finances and on their lives.
4. Pay more than the minimum. Half of all credit card holders pay only their minimum monthly payments (Source: Experian-Gallup Personal Credit Index survey). Consumers can slash repayment time - and total payment costs - by paying more than the minimum payment. Stroh advises making the highest payment on the credit card or loan with the highest interest rate. When that debt is repaid, add the higher payment to the next-highest-rate debt until that loan is paid off. "At first, the process can feel slow, but eventually you will see exciting progress," Stroh said.
5. Seek help. For those with serious debt that they can't pay, help is available, especially if the situation was caused by a short-term problem such as a medical emergency. According to Demos, 29 percent of low and middle-income households with credit card debt reported that medical expenses contributed to their current balances. Other emergency options include borrowing from relatives, borrowing against life insurance or retirement funds, or, possibly, a form of debt consolidation. If still more support is needed, seek out a trustworthy debt resolution advisor. For more ideas, visit http://www. bills. com/debthelp/.
Based in San Mateo, Calif., Bills. com is a free one-stop online portal where consumers can educate themselves about complex personal finance issues and comparison shop for products and services including credit cards, debt relief assistance, insurance, mortgages and other loans. The company blogs about consumer finance issues at http://www. bills. com/blog. Since 2002, Bills. com and its partner company, Freedom Financial Network, have served more than 15,000 customers nationwide while managing more than $350 million in consumer debt. The company's co-founders and CEOs, Andrew Housser and Brad Stroh, were named Northern California finalists in Ernst & Young's 2006 Entrepreneur of the Year Awards.