Tips for paying down credit card debt as household debt hits highest level ever

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Posted at 6:16 AM, May 25, 2023
and last updated 2023-05-25 06:17:53-04

(WXYZ) — Total household debt has surpassed $17 trillion for the first time ever. According to the Federal Reserve Bank of New York, balances at the end of March were $2.9 trillion higher than at the end of 2019, before the pandemic recession

With that news, we're taking a look at how it's impacting customers and what they can do to dig out of debt..

GreenPath Financial Wellness, a nonprofit credit counseling agency based in Farmington Hills, anticipates receiving more calls from people who are in financial distress.

Lavell Neal made one of those calls in February 2013 when he was 35 because he was swimming in bills. He had about $75,000 in debt. He paid it down in about seven years.

Neal enrolled in GreenPath's debt management program, which took some time because all five of his credit cards were maxed out and he was seriously delinquent on more than one of them.

The recent report shows the share of current debt becoming delinquent increased for most debt types, with the "flow into serious delinquency" greatest with credit card debt – 4.57% in the first quarter of the year.

“What did you find most concerning about the report?” I asked GreenPath CEO Kristen Holt.

“The overall increase in credit card debt and the increase in 90-day delinquencies," she said.

Holt said your credit score can take a hit if your minimum payment is even one day late, but your credit score will plummet if you're 90 days late.

“The more delinquent you are, the worse it gets. And then your card's probably going to get closed. And then if you need credit, you're going to have very few options," she said.

Holt said after a credit card issuer closes your account, it takes a while to reopen it.

To get out of credit card debt, first, Holt said to sign up for autopay for at least the minimum payment. Just make sure there's enough money in your account to cover it.

Second, call your credit card issuer to see what payment options are available. If you're not a repeat offender, they'll often work with you.

Third, call a nonprofit credit counseling agency like GreenPath to consider a debt management plan where your interest rates can be negotiated down.

Neal, who is now a married father of one with a second baby on the way, said he and his wife are now debt-free.

"How does that feel?" I asked.

"Oh, literally a burden lifted off my shoulders," he said.

The Neals now have emergency savings and are looking to move into a bigger home.

If you’re stressed out about your finances, you can contact GreenPath Financial Wellness for a free financial counseling session. The number is 800-550-1961.