Consumers repaying record amount of credit-card debt

Consumers are repaying a record amount of credit card debt — another sign that more are trying to get their financial house in order, according to a new report.

Last year, consumers repaid more than $122 million to their creditors through a national, nonprofit credit counseling group called CredAbility, which is based in Atlanta. It’s a 3 percent increase from 2009 and a record for the 47-year-old organization, which was formerly known as the Consumer Credit Counseling Service of Greater Atlanta.

Already this year, the numbers continue to rise. In the first quarter, repayments are up 9.5 percent from a year ago, CredAbility said.

While the Great Recession caused personal bankruptcy filings to soar, other consumers are choosing different paths. Some are beefing up their savings, some are reducing debt and some are doing both.

“Many consumers are deciding to take control of their financial lives by working with their creditors to pay down their debt, even if it takes 36 months or longer,” Vicki Williams, vice president of Debt Management Plan Services for CredAbility, said in a statement.

A debt management plan helps consumers struggling with credit card debt to take advantage of reduced payments with creditors, CredAbility said. Many creditors offer favorable repayment terms to consumers who enroll in a debt plan, including significantly lower interest rates. The creditors may also eliminate late fees and penalties once a consumer enrolls.

In 2010, the average income of a person enrolled in a CredAbility debt management plan was $53,880 — a 4 percent increase over 2009, CredAbility said. Each person had an average of $24,266 in credit card debt in 2010 — a 4.5 percent increase from the year before. The average age was 48 — up from 45 in 2009.

On Tuesday, you can meet a Gwinnett couple behind the numbers. My column will discuss how they got into an $83,000 financial mess and how they paid it off over five years.

- Henry Unger, The Biz Beat

For instant updates, follow me on Twitter.

103 comments Add your comment

Obozonomics

April 25th, 2011
1:33 pm

Oh stop it the Obozo administration told me to spend my way out of debt, so I am trying to.

lovelyliz

April 25th, 2011
1:40 pm

Don’t feel bad for the credit card companies. Even if no one paid interest, they would still make $ as they get a percentage of every credit card transaction.

Kris

April 25th, 2011
2:11 pm

Every time you use your debit/credit card at the pumps, the banks are getting an additional 2% from the station….I’ll use cash at the pumps from here on out thank you.

Georgia Consumer Law News

April 25th, 2011
2:14 pm

This title of this article is misleading. “Each person had an average of $24,266 in credit card debt in 2010 — a 4.5 percent increase from the year before” is the real story.

http://www.Georgiaconsumerlawnewsfeed.com

Shudow7071

April 25th, 2011
3:36 pm

Ahhh, the old credit card rate ploy stunt trick!

TnGelding

April 25th, 2011
3:38 pm

Great! Better late than never! But the increases are very modest and is only the tip of the iceberg. Makes you wonder why the banks were charging such high interest rates to begin with.

A.S.Mathew

April 25th, 2011
7:22 pm

When we learn to use cash exclusively for every purchase possible, we
can save hundreds of dollars every year. Besides, we can be gradually
free from debt. Credit card business which was started more than
forty years back was used by a few people then; but now, every person
has several credit cards, and it has pushed them to deeper debts and
bankruptcies. American banking system made billions of dollars down
through the years through credit card business by charging abnormal
interest rates, over the limit fees, late charges and membership fees
etc, which was the worst legal rip off undertaken by the banking industry.

MrLiberty

April 25th, 2011
10:03 pm

If the Federal Reserve was not printing money out of thin air, the banks would have nothing to lend. They certainly cannot lend out savings as americans do not save. This is the trap and the crime of fractional reserve banking. The system must be ended if we as a country ever hope to pull ourselves out of our slavery to the banking system. End the Fed.

Marc

April 25th, 2011
11:49 pm

What about the country going back to the “gold” standard? Wasn’t it during Nixon’s tenure we left the “gold” standard? I think I remember reading about it sometime ago. Any of the “old timers” out there remember that? :)

TnGelding

April 26th, 2011
4:20 am

Why not the tulip standard? Or pick your poison.

We’re saving at record amounts, especially when you consider SS taxes which will pay dividends for most of us. For some reason 401(k)’S aren’t counted as savings.

There is plenty of money to lend, just not enough borrowers with good credit.

Hilton

April 26th, 2011
7:31 am

TnGelding
I have an 800 score and can’t re-finanace my house.
Never missed a payment, and never late.
The banks are scumbags. Period.

LD

April 26th, 2011
7:42 am

I agree with Hilton, my husband and I both have credit scores of 800. We have 15 years left on our mortgage and when we tried to re-finance, Wells Fargo said we actually had to pay them money as we were not “borrowing enough.”

Jeff

April 26th, 2011
7:58 am

I was able to pay off $24,000 in credit card debt when I was 26 and I haven’t looked back! it’s amazing how free one feels without the bondage of debt. I’m 31 now and have been able to discipline myself into paying off the credit cards every month. LD and Hilton, have y’all tried a credit union? I work for a credit union, full disclosure, but it may be easier for you all to refinance through one as opposed to a bank!

Bill

April 26th, 2011
8:03 am

Jeff makes a good point. For everyone here that thinks banks are blood sucking leeches (and I agree with you), take your business elsewhere. Join a credit union where you are the boss.

Bill

April 26th, 2011
8:06 am

I should add one thing to my previous post. credit unions are cooperatives, so if you are worried about creeping socialism then stick with the banks and enjoy the fruits of capitalism. I haven’t dealt with a bank in 30 years, and I don’t miss it.

Kris

April 26th, 2011
8:08 am

I’m thankful I learned my lesson in my 20’s about credit cards. I haven’t had one in over 20 years. Cash baby. The only thing I finance is my mortgage. Both cars are paid for with cash. All monthly household bills are paid through on-line banking.

Cash is THE best way to keep yourself out of debt. Oh, and quit trying to keep up with the Joneses. Frugal living is by far much healthier. No stress, no one can come take anything away from me. I sleep great at night, knowing that I don’t owe thousands on a freaking piece of plastic. I’ve seen it ruin too many lives and marriages.

Bill

April 26th, 2011
8:14 am

Kris points out one very good way to stay solvent, no credit cards. Another is the responsible use of credit cards. There are two legitimate uses for credit cards. The first is for emergencies (genuine). If you are young and getting started, and your car breaks down and you have to get to work, a credit card can get it going. Then you have to focus on paying it off. The second is convenience, and this is where you have to be careful. I charge pretty substantial sums on my cards every month, then I pay them off at the end of the month. If you can’t pay it off at the end of the month, that is a red flag. Stop using the card until you get it paid off. If you cannot get through the month without it, you are already in a downward spiral and need to seriously scale down your lifestyle.

Sharon

April 26th, 2011
8:14 am

Does anyone know how badly your credit score drops if you call the credit card company and close your account? I tried cutting up the cards but that doesn’t work. I don’t have any will power or discipline when it comes to credit cards. How often are credit scores updated?

Woofie

April 26th, 2011
8:15 am

A year ago I had $62,000 in credit card debt and my house was about to be foreclosed on. I was finally able to get a loan modification and paid off 95% of my credit debt. Of course then I get laid off a month ago so I’m not sure what’s next for me.

Tyrone Biggums

April 26th, 2011
8:20 am

I love credit cards. I charge every single purchase I make to a credit card, and pay off monthly balance in full. I am not going to turn down free money (cash rewards).

commoncents

April 26th, 2011
8:20 am

TnGelding- “Makes you wonder why the banks were charging such high interest rates to begin with”

They have to subsidize the fools who borrow and then default on their obligation. If no one was borrowing or if everyone would repay their debt on time, banks wouldn’t be able to charge those high rates

Slim

April 26th, 2011
8:22 am

Everytime the credit card rings, an Angel get’s his wings.

plopez2004

April 26th, 2011
8:25 am

I must say being debt free is the best feeling in the roll. I started the total money make over in 2010 and as of today I have no student loan, but I’m saving ever penny for another semester and I have no credit card debit.

I think as a society were learning that we don’t have to have everything that we see on TV and to down size a little and theirs nothing wrong with that.

commoncents

April 26th, 2011
8:27 am

Sharon-
That’s a hard question to answer. It would really depend on the number of cards you are closing, what your debt ratio is now and what it would be after closing cards, and what type of cards you are using. A major credit card (Amex, Visa, MC, etc) is a lot more significant than if you closed a department store card you opened 15 years ago that was never used. It also depends on how often you are opening and closing accounts, bc it is obviously bad to continuosly open and close accounts.

BOB

April 26th, 2011
8:31 am

Why dont the retailer give a discount if you pay cash and not use a credit card…….

Sanjeev

April 26th, 2011
8:44 am

After being laid off during the recession it took me 8 months to find a job (even with a 5 month head start so really 13 months). I had 2 interviews both of which were due to friends with openings at their places of employment. The first job went to a friend of the hiring manager. I got the 2nd job which was 67% less than my previous job. I kept looking and a year later I finally got an offer, I now make half of what I used to make and it’s enough to get by month to month, but nothing for savings. Credit cards is the only reason I was able to survive. I tried selling my house for over a year with no luck. I can’t refinance because I’m making my payments and now my debt/income ratio is too high to refinance.

ant banks

April 26th, 2011
8:49 am

the credit card companies and mortgages are the biggest effin’ rip off on americans!!!! war on terror? visa, master card and home mortgages have been terrozin’ citizens waaayy more than al qaida.

you buy a $100,000 house @ 5% interest over 30 years you have paid a whoppin’ 400,000 for that house.

you have a credit card with a $1,000 balance. it will take you 18yrs to pay it off payin’ the minimum due, totaling 7,800.

ant banks

April 26th, 2011
8:51 am

SANJEEV,

do what the rich do…FILE BANKRUPTCY!!! in less than 3 yrs, you will be credit worthy again, but not saddled with all of the debt. then, when you get a new start, BE SMART.

Kate

April 26th, 2011
8:55 am

Credit cards don’t jump out of your wallet and make you run up debt on them. You can mis-use any tool. That’s a choice.

I pay for almost everything with cards, even utility and insurance bills. The bill is paid in full at the end of the month. I’ve never paid a dime in interest, annual fees or late fees in decades of use.

This gives me a ton of rewards points. Right now I’m shopping for a new laptop that will be totally paid for by rewards points.

It’s all in how you play the game.

SmittyATL

April 26th, 2011
8:59 am

ant banks: Filing for bankruptcy is for leeches. It is nothing more than a way to make others bear the brunt for your inability or unwillingness to be responsible for your own actions. Just because others have done it is no excuse for you (or Sanjeev) to do it. That mindset is what is driving the country down the tubes. According to an article today in USA Today, Americans now rely on the government for a record 18.3% of personal income, while the country is $14 trillion in debt. Paying off credit card balances is a picnic compared to having to repay $47,000 in government debt for every man, woman, and child in the country. And my share goes up for every scumbag who files bankruptcy.

ant banks

April 26th, 2011
9:01 am

KATE,

glad your life is PERFECT. but everyone doesn’t just run up their cards for the hell of it. some people had to use them do to this economy. hope you get your computer.

TO EVERYONE ELSE, SEEK COUNSEL AND CONSIDER BANKRUPTCY!!! trump has filed bankruptcy TWICE and is considering runnin’ for president!!!

Homer

April 26th, 2011
9:03 am

Credit cards in the hands of people with a spending addiction are like booze to the alcoholic. I can drink and never become addicted. I can charge up my credit card and pay it off at the end of the month and never run a balance. The credit card is the enabler if you have a propensity to crave the high obtained by purchasing something new.

ant banks

April 26th, 2011
9:07 am

SMITTYATL,

sir, thank you for respondin’. i knew there was someone out there who has bought in to this AMERICAN DREAM bs.

i had 3 properties, 2 with renters and i lived in one. when the economy tanked out i was upside down in all three properties, through no fault of my own. i was very responsible, paid the notes on time, great interest rates. i called the mortgage companies to get them to modify my loans they gave me the run around. i found out that banks WANT YOU TO FORECLOSE so that the mortgage insurance will kick in. the banks get full price of the home, then resell it and get that profit too. once i figured this out, i said to hell with it. i filed bankruptcy and walked away from over 750k in debt that i incurred through no fault of mine. IF MORE PEOPLE WOULD FILE BANKRUPTCY MAYBE CREDIT AND MORTGAGE COMPANIES WILL DO THE RIGHT THING

ant banks

April 26th, 2011
9:09 am

SMITTY ATL,

please explain why a bank should be able to charge 300% interest on a home loan. you buy a 100k house and will have paid 400k at the end of 30yrs. YOU ARE OK WITH THIS? you sir, and the banks are the LEECHES.

k483

April 26th, 2011
9:12 am

I don’t think I’d have a parade just yet if a portion of that “pay down” was the result of creditors re-negotiating. What CredAbility calls “pay downs” we in the business world call “write offs”

mojetter

April 26th, 2011
9:13 am

I must concur with @ant banks…bankruptcy SHOULD be used as a last resort and it does not mean the person who is a filing is a deadbeat or a bad person….we all make mistakes and can overspend. The key is to learn from your mistakes.

@Smitty- I filed bankruptcy back in 2000 for about $10,000…I felt horrible and have to say it was one of the most depressing times of my life. I was in med school and racked up debt during undergrad just getting by…NOW I have a credit score of 750, am paying $150,000 in student loans back , have a mortgage, have a business, and this week am paying off all my (new) credit cards…..Im as productive as a citizen can be to an economy…all thanks to bankruptcy and a “fresh start”…if this country did not allow bankruptcy, I would have never made it through med school to be here today saying this. I LOVE THIS COUNTRY!!!!

Bryan G.

April 26th, 2011
9:16 am

Ant Banks – I had to split hairs, but Trump has never filed for Bankruptcy. Companies he owned a part of have gone BR, but not him personally. Uh, and besides, I will take his record of creating jobs over the current administration’s.

=====================================
I second what people above have said – it feels great to pay off your CC debt. Now I don’t use them unless I can pay it off that month. It’s definitely liberating.

ant banks

April 26th, 2011
9:18 am

SMITTYATL,

you are obviously a COMPANY MAN. are you aware of all the games that the credit card companies pulled to keep consumers in the blind? they raise interest rates on you whenever they want to. if are late payin’ MACY’s credit card, HOME DEPOT credit card can raise the rates on you because you paid MACY late. WTF? the credit card companies are workin’ together, but i suggest filing bankruptcy and you call me a leech? YOU EFFIN’ IDIOT. LOL. keep gettin’ suckered sucker!!!

mojetter

April 26th, 2011
9:19 am

@Bryan G….whats the difference between a personal bankruptcy and one filed by a business OWNED by an individual???? Is one better than the other? So the vendors and employees who dont get paid because the business filed bankruptcy…is that more noble? To me its worse….by the same reasoning doesnt that mean the business owner cant/shouldnt run a business?

ant banks

April 26th, 2011
9:22 am

MOJETTER,

congrats sir/ma’am. thanks for gettin’ SMITTYATL straight for me. i am not a loser/deadbeat. i didn’t want to file bankruptcy, but when i saw the games that the mortgage company was payin’ i was peeved!!! they would not remodify my loans quick enuff for me to stay solvent. i heard that is a tactic they use to force people to foreclose so that the mortgage insurance will kick in

Jason

April 26th, 2011
9:22 am

Get rid of the banks and join a CREDIT UNION people!! Credit Unions are a not for profit organization!! You pay a ton LESS fees on deposit and checking accounts and they actually pay you a reasonable rate of interest!! If you need a loan you dont have to jump through all the hoops the banks place in front of you!!! Wake up and get rid of the monster mega bank in your life and join a credit union!! You will GLAD you did!!

commoncents

April 26th, 2011
9:24 am

Ant Banks-
Banks are not charging 300% interest, they are charging ~5%… It is up to the consumer how long they want to finance something. 5% is a decent rate to borrow $100,000 from someone you don’t know, especially when cc companies want up to 28% or whatever the max is. If you can’t afford it or don’t want to pay that much interest on something you BORROWED for 30 years, don’t buy it! You can always rent.

Also, don’t forget that the interest you are paying on that loan is deductible, so you are getting a lot of that back. And, if you’re lucky, you can sell your home later and possibly even get return on your investment!

I don’t have any debt other than my mortgage, but it sounds like I will be paying for everyone else’s for the rest of my life :(

SmittyATL

April 26th, 2011
9:24 am

ant banks: Your 300% calculation is a bit suspect. But even if you want to twist the numbers that way, the fact is that you have never been forced to borrow money. You could have saved money instead, and just bought what you could afford. Instead you chose to overextend, without creating a sufficient financial buffer in case things didn’t go as planned. Then when things went wrong, you claim it was “through no fault of my own.” You took unwise risks, your investments failed, and now you want those of us who made better choices to bail you out. It’s really pathetic.

VOS

April 26th, 2011
9:24 am

Smitty, you worry about yourself and don’t tell people how to run their finances and that they have some moral obligation to pay their debts. I can tell you what to do with your moral obligation. If people don’t want to or can’t pay than fine, thats their choice. But for someone like you to get on your soapbox and scream moral implications is obsurd. If people can short sale, file chapter 7, walk away or whatever to get out of debt, more power to them. Thats the system and if you know how to play the game and work the system than good for anyone who does, I aplaud it b/c you know what? If the banks (and they have done it…see Blackrock for one for walking away from deals they were morally obligated to pay) can do it, than so can the average person. You are the Leech Smitty and take your holier than thou attitude somewhere else.

ant banks

April 26th, 2011
9:25 am

JASON,

you are correct sir!! i am with delta community credit union and love it.

mojetter

April 26th, 2011
9:26 am

Kris

April 26th, 2011
9:27 am

Oh yea, bankruptcy is the way to RUN AWAY from your obligations. Run up the debt, enjoy the lavish lifestyle, then say, Oh I can’t pay for this, so I guess I’ll just file bankrutpcy and VIOLA no more debt. I believe that is the coward’s way out. That’s why the courts had to modify the rulings of Chapter 7 &13. Too many people were running away from their personal responsbility.

Ant Banks – you are an idiot. YOU Bought all three properties. YOU rented them out, hopeing to make money. That backfired in your face, so you ran away from your obligations. 750K in debt through no fault of your own? What world do you live in????? Take some personal responsibility for your situation. Again – live within your means…..Geez……

And the banks DO NOT want to foreclose. They lose TONS of money and can’t get rid of the property.

commoncents

April 26th, 2011
9:29 am

mojetter-
If you file personal bankruptcy, creditors can still target your business. If your company files bankruptcy (and if your company is what is being targeted) creditors can no longer attack you or your business.

There are a lot of other variables such as how the business is set up (LLC,LLP, etc) but that is the general idea

SmittyATL

April 26th, 2011
9:30 am

VOS, that sounds wonderful, except for the fact that I have to foot the bill for people who don’t pay their debts, so it is my business. There’s no such thing as a free lunch.