More borrowers seek financial counseling as credit card rates near record highs
SALT LAKE CITY (KUTV) — President Donald Trump’s push to get credit card companies to voluntarily cap interest rates at 10% has gone nowhere. But consumer advocates say Americans struggling with high-interest credit card debt still have options to lower their rates and pay down balances faster.
Nonprofit credit counseling agencies say they are helping more people as credit card balances climb and interest rates remain near record highs. Americans now carry about $1.2 trillion in credit card debt.
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President Donald Trump’s push to get credit card companies to voluntarily cap interest rates at 10% has gone nowhere. But consumer advocates say Americans struggling with high-interest credit card debt still have options to lower their rates and pay down balances faster. (KUTV)
Samantha Andrus-Henry said a cascade of personal crises pushed her deep into debt. After losing her job, she lost her father. Then her daughter became seriously ill. Unable to work, she relied on credit cards to cover expenses.
“We all plan for one crisis, but no one plans for the week I had,” she said.
With interest rates on her cards as high as 29%, she said the stress was constant. She worried about her debt day and night.
“I thought, my God, I’m going to be paying for 17 to 25 years,” she said.
Like many people, she felt ashamed and didn’t know where to turn for help. She said she fought the “pull yourself up by the bootstraps” mentality that is so pervasive in American culture and keeps people from asking for help.
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Samantha turned to Money Management International, a nonprofit credit counseling agency. The group’s counselors negotiated with her credit card companies to reduce her interest rates and restructure her payments. She said her total debt dropped from $17,000 to $9,000.
“I’m starting to feel better, like I can have a fresh start again, ” she said.
Thomas Nitzsche, a spokesman for the organization, said many clients use credit cards to bridge gaps between income and expenses, while others use credit cards as a safety net after hardship.
Most MMI clients have about $30,000 in unsecured debt when they reach out to the organization for help.
“Eventually, you run out of runway on that credit card. You can’t keep up with minimum payments or you run out of credit limit, and that’s when people turn to us,” said Nitzhe.
He said balances have risen, interest rates are near historic highs and delinquencies are ticking up. The agency has also seen an increase in debt collection activity, including lawsuits against consumers.
Nitzsche said nonprofit counselors can offer free advice and, in many cases (depending on the client’s credit score or financial history) , negotiate lower interest rates so that more of a borrower’s monthly payment goes toward principal instead of interest.
“It allows them to see a light at the end of the tunnel, a sense of hope, a date when they will be out of debt,” he said.
Nitzche said it’s common for people to feel shame about having debt – but that shame keeps people from getting help. He urges people to reach out to MMI or other reputable noon-profit credit counselors.
“American would rather talk about anything other than their personal finances, money or debt. They’d rather talk about politics, vaccinations or sexual health,” he said.
Nitzche also notes that borrowers can call their credit card companies directly to request a lower interest rate, particularly if they are experiencing a hardship such as job loss or illness. Credit card companies often have hardship programs, though consumers may need to be persistent in making phone calls, or sending messages before getting help.
Trump called on credit card companies this year to cap interest rates at 10%, but companies have not agreed to do so.
Ted Rossman, an analyst at Bankrate, said issuers are unlikely to voluntarily lower rates.
“The credit companies are not going to do this voluntarily,” Rossman said.
He said a 10% cap would require an act of Congress, and while some lawmakers in both parties support the idea, there are not enough votes at this time.
Rather than waiting for government action, Rossman said consumers can explore other options, including applying for a zero-percent balance transfer credit card or working with a reputable nonprofit credit counselor.
“Take matters into our own hands,” he said.
It’s important to note that if you use a zero-percent balance transfer credit card, you must pay-off the balance before the zero-interest term expires and before the high interest on that card kicks in.
Samantha said the assistance has given her hope and breathing room to focus on rebuilding her life.
“It allows me to focus on the things I need to do to get my feet back under me, so I can get back to where I was before this,” she said.
Consumer advocates also note that borrowers can call their credit card companies directly to request a lower interest rate, particularly if they are experiencing a hardship such as job loss or illness. Issuers often have hardship programs, though consumers may need to be persistent in asking for relief.
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