Consumer Credit

It's the number one issue keeping you up at night and the leading cause of divorce.

That’s right, money!

If you're like most Americans trying to figure out how to get out of debt, fox 25's Diana Rocco has some valuable advice.
 

SCRIPT:

They're angry. They're frustrated and they don't know what to do or where to turn

Consumer debt is the worst it's ever been. The average American family in debt spends 25% of their earnings paying down their credit cards.

We've all heard the enticing ads on the radio. “Over whelmed with debt?” or “Looking to avoid bankruptcy?”

Those infomercials are very enticing

But watch out -- debt settlement companies may promise all of the answers but for most people they're hardly the solution. These companies will promise they'll negotiate your debt away. Working out a lower interest rate and slashing what you owe in half. People are getting excited. “Wow! I have 20-thousand dollars of credit card debt and I only have to pay 10 back!” It sounds great, but in experience if it sounds to good to be true… it probably is.

You need to find out what they're motivation is.

Financial Advisor Deb Niemen says stay away from the 1-800 numbers. First off they're charging you a lot of money. Plus, before debt settlement companies will even work with you, you have to already be months behind in payments to creditors. If you're current with your bills a debt settlement company will convince you to immediately stop paying your credit card bills. That leaves a big black mark on your credit report

They charge very high fees to do that service for you anywhere form 12 to 25% of the balances is what we're seeing

They are not anymore capable then negotiating that settlement then you are.

Ali Mahood is non profit credit counselor. Her agency helps dozens of people a week victimized by these companies and putting them on the right track for free.

Her average client right now since 2008 has over $21,000 of credit card debt.

The average American household has about $5,500 worth of debt. Credit counselors attribute that, most of the time, to two things.

One a major devastating event like a divorce or job loss or impulsive spending. People just trying to keep up with the Jones.

What the recent crisis has showed us is that we really have to return to basic values of living with in your means.

The first task is to stop the spending. Then figure out what option works best for that particular person. Mahood says sometimes debt settlement and bankruptcy are favorable options. If you've already fallen behind

For most debt management is often the answer. Negotiating a lower interest rates and the consumer agrees to stop using the cards and pay them off in five years.

Unlike debt settlement companies, debt management firms are strictly regulated by the government.

We try to get to the real underlying issue first and then we create a realistic budget. There are something’s you can't change over night. It is hard to stop the habits that got you there in the first place.

Go back to basics and if you can't afford or don't have the cash for it… Don't buy it or use your debit card.