Eight Tips to Avoid Unnecessary Spending as Credit Card Debt Rises in Massachusetts

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Nonprofit American Consumer Credit Counseling offers debt advice as Massachusetts ranks in the top half of U.S. states with the highest credit card debt.

According to a 2013 TransUnion report, Massachusetts residents owed an average of $5,142 per borrower in 2013, ranking the Bay State 16th in the nation in credit card debt.

“It is important that credit card users are educated on how to make payments on time and protect themselves from getting in over their heads in debt.”

The number of consumers who racked up expenses on their credit cards rose slightly over last year. According to the Federal Reserve, the average American household’s credit card debt has increased 2.26 percent from October 2013 to October 2014. While the high cost of rent, groceries and other necessary expenses are taking a toll on consumers, oftentimes the biggest issue is how to avoid unnecessary spending.

The challenge is a particular concern in Massachusetts, which ranks in the top half of U.S. states with the highest credit card debt. According to a 2013 TransUnion report, Massachusetts residents owed an average of $5,142 per borrower in 2013, ranking the Bay State 16th in the nation in credit card debt. The number is higher than the national average of $4,965.    

“It is easy for credit card debt to pile up and spiral out of control if you aren’t financially aware,” said Steve Trumble, President and CEO of American Consumer Credit Counseling. “It is important that credit card users are educated on how to make payments on time and protect themselves from getting in over their heads in debt.”

As national Financial Literacy Month kicks off this April, American Consumer Credit Counseling is offering the following tips on how to reduce excessive credit card debt:

1.    Do not use credit cards to finance an unaffordable lifestyle. If you are constantly using credit cards and are unable to pay the resulting bill each month, then consider whether you are using your cards to try and finance an unreasonable budget.

2.    Avoid using credit cards if you’re already in financial trouble. Finance charges and other fees will add to your debt burden. However, using your credit card in a time of financial difficulty is better than taking out a home equity loan, where your home is put on the line.

3.    Don’t get hooked on minimum payments. Some credit card issuers have set their minimum payments as low as 2 percent of the balance. Others may set it to 4 percent. If you pay only the minimum, it will take a long time to pay off your debt. For example, if you owe $5,000 on an account with 18 percent APR, it will take over 44 years to pay it off with 2 percent payments. Perhaps even worse, you will have paid $12,431.00 in interest.

4.    Don’t run up the balance during a temporary “teaser” interest rate. Money borrowed during a temporary or promotional rate is likely to be paid back at a much higher permanent rate.

5.    Make your credit card payments on time. Avoid late payment charges and penalty rates if you can. Bad problems get worse fast when you have late fees and higher rates to pay during financial difficulty. It’s worth calling to ask for a fee to be waived if you were accidentally late, or have a good excuse.

6.    Avoid the special services, programs, and goods that credit card lenders offer to bill to their cards. Most of these extras – fraud protection plans, credit record protection, travel clubs, life insurance, etc – are bad deals.

7.    Beware of unsolicited increases to your credit limit. Don’t assume that this means that your lender thinks you can afford more credit. Lenders generally increase limits for consumers that they think will carry a bigger balance and pay more interest, thus creating additional credit problems.

8.    Don’t max out your cards. It’s easy to get hit with over-limit fees. Also, a credit card account close to its limit will cause a big drop in your credit score. Be aware of whether or not your account allows you to spend over your limit, as this is optional.

ACCC is a 501(c)3 organization, that provides free credit counseling, bankruptcy counseling, and housing counseling to consumers nationwide in need of financial literacy education and money management. For more information, contact ACCC:

  •     For credit counseling, call 800-769-3571
  •     For bankruptcy counseling. call 866-826-6924
  •     For housing counseling, call 866-826-7180
  •     Or visit us online at ConsumerCredit.com

About American Consumer Credit Counseling

American Consumer Credit Counseling (ACCC) is a nonprofit credit counseling 501(c)(3) organization dedicated to empowering consumers to achieve financial management and debt relief through education, credit counseling, and debt management solutions. In order to help consumers reach their goal of debt relief, ACCC provides a range of free consumer personal finance resources on a variety of topics including budgeting, credit and debt management, student loans, homeownership, identity theft, senior living and retirement. Consumers can use ACCC’s worksheets, videos, calculators, and blog articles to make the best possible decisions regarding their financial future. ACCC holds an A+ rating with the Better Business Bureau and is a member of the Association of Independent Consumer Credit Counseling Agencies. For more information or to access free financial education resources, log on to ConsumerCredit.com or visit TalkingCentsBlog.com.

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Tony Catinella
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