Articles on Credit Card Debt Solutions

Understand your credit card debt situation and how to control and track it.

This article on credit card debt settlement points out that over 66% of young people are in debt and worried about how to solve the problem.

Credit Card Debt Settlement Article

Young people struggle to deal with kiss of debt
By Mindy Fetterman and Barbara Hansen, USA TODAY
Thirty years ago, the "generation gap" reflected the cultural gulf between World War II-era parents and their children. Parents then just didn't get sex, drugs and rock 'n' roll.
Today, the gap is about debt.

This generation of twentysomethings is straining under the weight of college loans and other debt, a crushing load that separates it from every previous generation.

Nearly two-thirds carry some debt, and those with debt have taken on more in the past five years, according to an analysis of the credit records of 3 million twentysomethings that Experian, the credit-reporting agency, did for USA TODAY. Their late payments are rising, and they're more likely to be late than other Americans are.

Nearly half of twentysomethings have stopped paying a debt, forcing lenders to "charge off" the debt and sell it to a collection agency, or had cars repossessed or sought bankruptcy protection.

High debt loads are causing anxiety, too. A poll of twentysomethings by USA TODAY and the National Endowment for Financial Education (NEFE) found 60% feel they're facing tougher financial pressures than young people did in previous generations. And 30% say they worry frequently about their debt.

A budget can help young people cut their spending
By Mindy Fetterman, USA TODAY
Budgeting-Credit Card Debt Settlement Article

When twentysomethings, their education behind them, move into the real world for the first time, they can be shocked at how far and how fast their standard of living plummets.

Forty-three percent of people ages 22 to 29 who were polled by USA TODAY and the National Endowment for Financial Education said their living expenses turned out to be "higher than expected."

This is the time in life when young people may find themselves facing what may be a new word for them: budget.

Interactive budget: Keep track of your spending

"Budget ought to be a four-letter word," laughs financial planner Mark Bass of Pennington Bass and Associates in Lubbock, Texas. "That's how people treat it."

Calculator: What's it worth to reduce my spending?

But if your money seems to slip through your fingers, a budget can be a valuable tool. It can help you finally get a firm handle on how much you're spending.

Calculator: How much will my savings be worth?

"For anyone to say, 'I don't have a budget' or 'I don't want to bother' is like going to play professional football but saying you don't want to learn how to block," says Phillip Cook, a financial planner at Cook and Associates in Los Angeles. "You'll get killed on the field."

Here are a few ways to find out where you might be wasting money:

•Write it down. Use an Excel spreadsheet, or just a yellow legal pad, and write down everything you spent in the past month. Put spending in categories, such as rent, utilities, groceries, etc. Look at your bank statement, checkbook and ATM debit card records.

It's easy to track spending on set expenses, such as rent. But you can easily lose track of how much you shell out on lunch, or on drinks after work with friends — especially if you use cash.

"People don't think they're overspending," says Eric Hess, a financial planner at Alpha Financial Advisors in McLean, Va.

"They say, 'Oh, that was a special purchase' or 'That was a special date.' But those special things add up."

•Track what you spend over time. Use that same spreadsheet or notepad to track your spending activity each month. Are you spending more money on one category than you should? Consider using budgeting software, such as Quicken or Microsoft Money. They'll take your online bank statements, automatically fill in your budget and do the math. You can see quickly what you're spending where.

Of course, you have to believe what the programs tell you, Bass says. "People look at how much they spend eating out, and they say, 'Naaaaah. That's impossible. I couldn't have done that.' " You probably did.

•Pay bills online. Online bill paying is faster that writing out checks and mailing them off, and the money is taken out of your account more quickly. It will take a bit of time to set it up. But once you do, you can monitor your account online — daily, if you want — to find out how much money is in your account and which bills have been paid.

•Use only a debit card. You can keep track of money you spend daily if you use a debit card instead of cash or a credit card. The money comes straight out of your account, and your statement will then have everything you've spent money on. "It's pretty simple," Hess says. "When there's no more money, there's no more money."

•Avoid ATM withdrawals. You need cash in your pocket, but beware the all-too-easy "fast cash" button on ATMs; it's easy to lose track of how many times you've hit it. "Take out $100 a month and make it last all month," Hess says. "If you take out more, you'll just lose where those dollars are going."

•Avoid credit cards. Use credit cards only for major purchases and plan to pay those off with regular payments over a certain period — say, six months — Hess suggests. "Credit card companies survive on the fact that people forget what they've charged," he says. "They'll look at a $6,000 credit card bill and say, 'How did that happen?' "

•Cut spending by 10%. "Ratchet down" spending by small amounts at first, Bass says. That'll make it easier to make it a habit. "If you say you're going to run a marathon, you don't go out and run 26 miles the first day," he says. "You see if you can just run around the track one time."

•Pay off high-interest credit card debt. Use your savings first to make a dent in any credit card debt you have, Hess suggests. "If you pay off an 18% card, you're already 18% ahead on your money," he says.


Advice: Create a budget, reduce living expenses and earn more money

Advice on cutting your credit card debt
By Mindy Fetterman, USA TODAY
With $165,000 in student loan debt and additional debt on her credit cards, Heather Schopp is struggling just to pay the minimum payments each month.
"She's treading water, but getting further away from the shore," says Phillip Cook, a financial planner at Cook and Associates in Los Angeles.

PROFILE: Chiropractor works two jobs to chip away at $165,000 in school debt

It's time to focus on getting to dry land. And that means a "significant change in mind-set," Cook says. She needs to create a budget and stick to it, cut the interest rate on her credit card debt, shrink spending and generate more income.

"A budget will give her an exact understanding of where she's spending money and what things are keeping her from achieving her goals," Cook says. "Now she can ask herself: 'What's more important: shoes? Or my goal?' "

At Cook's insistence, Schopp is using an Excel spreadsheet to trace her spending. With it, she can see how much she's spending on clothes, food, time out with friends, rent and debt payments, among other things. The spreadsheet has three columns: projected spending, actual spending and the difference.

One month, Schopp has noticed, she spends a lot on clothes, the next month, nothing. "I'm looking at it and saying: 'What was this chunk of money? Do I even remember what I bought for that $150?' "

She's able to see that some months she "gets lazy" and doesn't prepare her own lunch to take to work. "You think you're just spending $5 or $6 or $7, but do it five times a week and suddenly you're spending $130 a month on random lunches!"

A budget will help her see "how every dollar earned is spent," Cook says. And that will help her funnel money from spending to paying off debt.

INTERACTIVE BUDGET: Keep track of your spending

Schopp already spends about 58% of her after-tax income ..........