Credit Card Debt
A Closer Look: Colorado Foreclosures In Decline
In this second part of a two-part series on Americans and debt, Colorado debt-relief attorneys examine foreclosure trends across the state. In an earlier post to our Denver Bankruptcy Attorney Blog, we noted that Colorado ran second only to New Hampshire for over-the-month job creation in January, and Colorado bankruptcy filings have hit their lowest number since 2009.
In tandem with Colorado bankruptcy and unemployment numbers, foreclosure rates across the state are also dropping. The Colorado Department of Local Affairs reports that Colorado foreclosure filings are now at the second-lowest level reported since 2006, hopefully indicating some “true stability” in Colorado housing markets.
Data tracking quarter-to-quarter foreclosure rate comparisons for 2010 and 2011 show evidence of a decline, as follows:
~ Second quarter (2011) number of foreclosure filings: 7,233
~ Second quarter (2011) number of sales at auction (completed foreclosures): 5,333
~ Second quarter (2010) number of foreclosure filings: 10,233
~ Second quarter (2010) number of sales at auction (completed foreclosures): 5,887
Year-over-year second quarter comparisons indicate that in 2011:
~ foreclosure filings were down 29.4 percent with 3,000 fewer filings, and sales at auction (completed foreclosures) were down 9.4 percent with 554 fewer sales at auction.
According to the report, the drop-off in the total number of foreclosures has been attributed, to some degree, to the suspension or of many foreclosures in response to the so-called “robo-signing” controversy. While the initial slow-down spanned just October and November 2010, the legacy of that episode continues to affect the speed of the foreclosure process statewide. It is further believed that job growth and a continue surge in the national economic outlook also play a role in the drop in foreclosure filings.
With that said, the Denver Post is now reporting that thousands of Colorado homes are believed to have been lost to foreclosure in association with the controversy. And a second Denver Post report shows conflicting foreclosure rates from the Colorado Division of Housing and RealtyTrac indicating that for Colorado homeowners, the foreclosure nightmare is far from over.
If you are dealing with a Colorado bankruptcy or debt-related issues, contact the Law Office of Jon B. Clarke today to schedule a free consultation.
A Closer Look: Colorado Bankruptcy, Unemployment Track Decline
In this two-part series on Americans and debt, Denver debt-relief attorneys examine employment, foreclosure and bankruptcy trends across Colorado and the nation. While we are happy to report these three key indicators are all showing signs of recovery statewide, we also know that for many struggling Colorado families, the turnaround simply isn’t coming fast enough.
In their latest report, the Bureau of Labor Statistics indicates that 45 states, along with Washington D.C., each recorded unemployment rate decreases for the month of January, and that 48 states (District of Columbia included) registered unemployment rate decreases from a year earlier. In both instances, only New York saw an increase, while a handful of states saw no changes. Overall, the national jobless rate currently rests at 8.3 percent, down .8 percent since January 2011.
Across Colorado, the unemployment rate dropped one percent (from 8.8 percent in January 2011 to 7.8 percent in January 2012) during the last year. Between December 2011 and January 2012, Colorado ran second only to New Hampshire for over-the-month job creation with a gain of 19,500 jobs. The year-to-year comparison also showed modest growth of 43,400 jobs between January 2011 and January 2012.
A review of Colorado bankruptcy statistics published by the Administrative Office of the U. S. Courts indicate an ongoing decrease in the number of bankruptcy filings since reaching a peak in 2010. Between January and February of this year, there were 3,690 bankruptcy filings in Colorado. During the same time frame in 2011, records indicate there were 3,912 filings. Comparing the two captures: there have been 222 fewer filings in 2012.
The number of January-through-February Colorado bankruptcy filings since 2008 are as follows:
~ January and February 2012 bankruptcy filings: 3,690
~ January and February 2011 bankruptcy filings: 3,912
~ January and February 2010 bankruptcy filings: 4,050
~ January and February 2009 bankruptcy filings: 3,129
~ January and February 2008 bankruptcy filings: 2,493
Denver bankruptcy lawyers recognize that statistics indicating a bump in job growth and a decline in bankruptcy filings does not spell relief for the many families facing mounting credit card and other personal debt while fighting to stay out of a Colorado bankruptcy courtroom. At the Law Office of Jon B. Clarke, we bring decades of debt-relief experience and know how to help clients obtain a fresh start. To schedule a free consultation, call us at (303) 779-0600 today.
Colorado Bankruptcy Watch: State Senate Muzzles Employers Stalking Credit Scores
Colorado debt-relief attorneys applaud the efforts of Sen. Morgan Carroll (D-Aurora) along with the rest of the Colorado State Senate for passing SB 12-003, otherwise known as the Employment Opportunity Act of 2012.
As part of a larger “Colorado Works” legislative effort that aims to increase employment across the state, the goal of SB 12-003 is simple: to prohibit employers from using an applicant’s credit report information as a screen for employability — unless the position in question is directly related to money or asset management.
In addition, if an employer opts to not to hire an applicant based their credit report score, this reasoning must be disclosed to the candidate. Also, prospective employees must be given the opportunity to explain any negative information on their report. Failing to comply with these directives can lead to civil penalties. The bill now heads to the House of Representatives for consideration.
According to USAToday, Colorado now joins seven other states that have enacted similar laws to prevent credit report discrimination against job seekers.
Denver bankruptcy lawyers have seen time and again how unemployment sparked by our nation’s economic downturn has devastated families and destroyed, literally, millions of personal credit scores. As reported in the Coloradoan, credit scores drop for numerous reasons, including unemployment. But even for those who have managed to cling to their jobs, factors ranging from medical emergencies to identity theft to divorce and single parenthood — each of these factors can and do contribute to personal financial crisis and, ultimately, the tanking of personal credit rating.
Forbes offers the following tips for job seekers wanting to improve their credit standing:
~ check your credit score (federal law entitles you to an annual free credit report),
~ pay your bills on time,
~ reduce your debt, and
~ manage your credit card(s) responsibly (note: NOT having a credit card can be as bad as abusing one).
Colorado Bankruptcy Attorney Jon B. Clarke have represented clients throughout Colorado and the Denver Metro area for more than 30 years. If you are dealing with bankruptcy or debt-related issues in Colorado, call (303) 779-0600 to schedule a free consultation today.
Soaring Gas Prices Push Families to Seek Colorado Debt Relief
Despite reaching a four-year low in unemployment claim filings, Bloomberg.com reports that thanks to a 17 percent jump in gasoline prices since January, consumer confidence is again taking a hit. Denver bankruptcy attorneys, like the rest of the nation, have been watching with dismay as gas prices continue to climb up, and up, and up.
Colorado debt-relief lawyers know that for those folks trying to curb spending to help make ends meet, transportation costs often give up the least wiggle room. Kids have to get to school and parents have to get to work, to the grocery, to the bank and so forth. For families struggling to stave off a Denver bankruptcy filing, the fact that gas prices across the nation have clicked upward for eight days straight does little to improve personal finances.
CNN Money reports that Colorado drivers are currently paying about $3.56 a gallon for gas. Thankfully, those prices are on the low end of the national average. As of this post, Wyoming drivers are enjoying the lowest gas prices at $3.40 a gallon as Hawaii drivers are paying out a whopping $4.48.
With that said, it isn’t just the spike in prices, but the amount of income spent to keep tanks full that paints a clearer image of how gas prices are impacting families. Across Colorado, residents are outlaying 5.4 percent of their income in fuel costs. In contrast, gas prices are gobbling up 11.8 percent of income for Mississippi residents, 10.6 percent for Montana drivers, and 10.0 and 9.9 percent in North and South Dakota, respectively.
Matching soaring gas prices with wobbly consumer confidence and a still-high unemployment rate means that for far too many Colorado families, preventing a personal financial crisis is just not possible. In many cases the economy simply isn’t improving fast enough as bills continue to pile up.
The debt-relief attorneys at the Law Office of Jon B. Clarke bring more than 30 years experience helping clients obtain a fresh start with mortgages, car loans, personal guaranty, credit card debt or other debt relief. To schedule a free consultation today, call (303) 779-0600.
Credit Card Debt Declines
Since the Financial Crisis in 2008 the total amount of credit card debt has declined consistently. Despite increases in consumer debt in the earlier months of 2011, the past two months have seen those increases evaporate. The reasons for the decline are less than clear, but several consistent opinions are common.
Economic Worries
The uncertainty on Wall Street has consumers spending less, saving more and paying down debts while they can. In essence, with the economic future still uncertain people are not purchasing goods on credit when they can save up for bigger purchases or simply pay down what they already owe. To do this some consumers have turned to debt consolidation or other alternatives to bankruptcy.
Declines in personal income also tend to drive down credit card debt. As more Americans are either unemployed, or facing unemployment, overall spending goes down. This contributes to the decline in credit card debt in part, even though many people suddenly with limited or no income at all are forced to turn to credit cards for basic purchases.
Institutional Changes
Banks changed their lending practices in the wake of the Financial Crisis. Fewer credit cards have been approved, and at substantially lower limits. Most financial institutions are less willing to extend large lines of credit to individuals these days than prior to 2008. Overall this makes less credit available for consumer purchases, driving down the national credit card debt.
Banks have also written off, or charged off, more debt that they considered too hard to collect. This is unfortunately not common enough to provide substantial debt relief to individuals of businesses, but rather reflects the bank’s desire to count the debt as a liability rather than an asset for their book keeping. The debt is typically in the hands of a collection agency, but no longer counts as credit card debt. This is not the same as a discharge of debt common to Chapter 7 proceedings.
August saw a marked decline in credit card debt, continuing a trend started in 2008. It serves, at the least, as an indicator of changes in the economic climate, if not more broadly as an indicator is substantial changes in the lending practices of financial institutions.
Consumers with debt-related complaints have a solution
In a prior post, we discussed the biggest complaints that consumers have and how credit card and other individual debt-related issues consumed two of the top three spots on the “Top Consumer Compliant List.”
Threatening collection practices seemed to play the largest role in causing debt to rise so high on the complaint list along with collection confusion and errors that should have been easily detected and avoided.
Laws related to debt and debt collection are constantly being reviewed and changed as societal needs develop. The Credit CARD Act of 2009 created new requirements for disclosures and protections for credit card users, but according to consumers, it is not enough. Approximately 252,009 complaints were made to consumer protection agencies in 2010. Despite the new protections, consumers continue to experience deceptive practices.
Consumers are calling for even stricter laws against creditors who misbehave not just laws that provide more disclosure requirements.
Many governmental consumer agencies that participated in the survey admitted a sort of failure to handle the large number of complaints that roll into their offices daily. The failure, they say is largely due to the budget cuts that have occurred across the board. As their funding decreases, their staff size decreases, their resources decrease and they have trouble giving every complaint the attention it deserves.
“Consumer protection agencies need more funds to do their jobs effectively,” said the director of consumer protection for the Consumer Federation of America. “They provide essential public services, like firefighters and police, and deserve the same support.”
Source: Fox Business, “Auto Repair, Credit and Debt Issues Top Consumer Complaint List,” Aug. 3, 2011
Consumers say debt-related issues cause them significant headache
Filing for bankruptcy protection is very helpful for people who have found themselves with too much financial stress to handle on their own. Often, individuals file after credit card and other kinds of debt become too high as a result of a change in economic circumstances like the loss of a job, large medical bills and many other situations.
Although filing for bankruptcy is helpful, most people did not plan to end there. They try to make the payments that they can, but when they are illegally threatened by creditors, it is hard to even want to pay. According to the most recent “Consumer Complaint List,” complaints related to credit card debt collection rank number two on the list, with other debt-related complaints trailing just behind in slot number three. Number one was auto-repair transactions.
According to consumers, credit card debt collection has gotten out of control despite laws that are supposed to protect them. Consumers reported that creditors were using highly offensive and illegal techniques like saying that they would kidnap their children unless they paid or extradite them to the Dominican Republic.
A lot of the threatening calls related to online loan applications. The major problem for some consumers was that the calls were being made for debts that were not even due. Many people had already paid off the loans while others said their information was obtained in a loan application process that they never even finalized.
Attorneys can help people with debt-related issues all the way from ensuring creditor workouts to dealing with threatening collection practices. Debt is stressful enough, but when you try to go about it alone, it can be even tougher.
Source: Fox Business, “Auto Repair, Credit and Debt Issues Top Consumer Complaint List,” Aug. 3, 2011
Why do people carry substantial credit card debt?
People suffer from overwhelming debt for many different reasons. Even though they may have good intentions about resolving their debts, sometimes people get discouraged if they do not see immediate progress. Certain factors may prohibit people from getting out of debt, such as when a job is lost, or if medical expenses become necessary.
Other people are persuaded, however, by believing that carrying substantial debt is normal. The following are other reasons why people may hold on to a significant amount of debt instead of seeking ways to resolve that debt:
- They spend beyond their means. The old adage, “the more you have, the more spend” certainly seems to ring true in many cases. Sometimes having a slightly higher income causes people to believe that they can spend more than they should. The people with the highest debt levels often have the highest income levels as well.
- They believe that they will need a windfall to pay off debt. Many people’s debt is so massive, the only way they can imagine paying it off is by inheriting a windfall, such as by winning the lottery or by inheritance. However, this does not have to be the case, especially if bankruptcy is used as an option.
- They operate on the belief that credit cards help build credit. While good credit is earned by borrowing and paying off balances on time and in full, carrying large loads of credit that you can barely make payments on is not a good financial strategy. In order to avoid getting into financial trouble, spend cash on purchases whenever possible.
Today’s culture has certainly convinced many that living on credit is okay. If you have been a victim of this theory and have acquired substantial debt, this does not mean that you are a bad person. If you recognize that your finances have gotten out of control, you should seek help to get out of debt. Bankruptcy can be an option. Once debt is eliminated, you will be given the opportunity to learn how to live within your means and live a debt-free life.
Source: NewsChannel5.com, “6 myths of financial independence,” Andrew Housser, 6 July 2011
Credit card debt is not to blame for dip in credit scores says CreditKarma
According to a recent report by CreditKarma, a company that follows national credit scores and household debt by studying data and publishing it on their website, credit card debt is not to blame for the recent three point drop in average credit scores.
The corporation found that since May of 2010, the credit scores of individual consumers nationwide have dropped three points to an average of 667. Although credit card debt has been a very real issue for many Americans, in the same time period, the level of credit card debt has been reduced by about 15 percent to an average of $6,740.
While overall the average credit card debt has decreased, Colorado Springs, Colorado remains one of the top cities for individuals with the largest amount of credit card debt averaging at a slightly higher rate of $7,000 or more.
There is a kind of false hope, says the credit tracking company as they reported that the average mortgage debt has also fallen by two percent. “As the housing market begins to double-dip and home prices plummet, it’s not surprising that homeowner debt and equity fell,” says the CEO of the corporation. “Banks aren’t going to enter into new housing loans or provide equity loans when home values continue to decrease.”
Other mentionable areas of debt that have experienced a change since 2010 are auto loan debt which is up by two percent, home equity debt which has fallen by five percent, and student loan debt which has also increased by five percent.
Source: Collections & Credit Risk, “Credit Scores Drop Three Points; Card Debt Down 15%,” Darren Waggoner, 9 June 2011
Should kids be given credit cards?
Many people in Colorado have found themselves in over their heads with credit card debt, which results in thousands of Colorado residents filing for bankruptcy each year. This begs a question: should we be giving our kids credit cards? Or are credit cards just setting our kids up for a lifetime of debt?
A recent article on msnbc.com tackled this issue, asking several experts for their two-cents on if and when kids should be given plastic. While there were many differences in opinion, all of the experts seemed to agree that the key is for parents to discuss money, credits cards and financial responsibly with their kids before they leave the house.
In fact, 57 percent of kids ages 12 to 17 said their parents had never discussed money management with them, according recent study released by the Junior Achievement Foundation.
One expert, who offers credit card advice for consumers on a website, said that a way to begin this talk is by allowing kids to get a credit card before they leave the house. He said that all three of his kids had credit cards by their senior year of high school so that he could “sit down and talk to them about the ins and outs of the credit card industry.”
“In short, we wanted to observe them and train them on credit cards for a year while they were under our roof,” he told msnbc.com.
On the other hand, another expert said that teenagers should not be given credit cards at all, as it “introduces a financially harmful substance” to teens rather than teaching them to “just say no” to credit cards.
But having no credit cards at all might be difficult in this world that has gone so electronic, with even pizza being ordered over the Internet and paid with credit cards.
A third expert said she believed that the best route is to start kids off with a co-signed card while they are still under their parents’ roof. That way, the parents have equal access to the card and the teen can be trained in on all of the important issues.
What do you think? Should kids be given credit cards? Or is it just a recipe for a lifetime of debt?
Source: msnbc.com, “Is it a good idea to give a kid a credit card?” Bob Sullivan, 6/17/2011.
Debt collectors accused of illegal harassment using Facebook
Debt can pile up for any number of different reasons. Individuals may fall into a patch of financial difficulty after running into an unexpected expense or suddenly finding themselves out of work. Small business owners may find themselves in debt after making a high-cost investment in their trade or losing customers to a competitor.
When a person’s outstanding bills exceed their available assets, they risk accumulating a large amount of credit card debt or finding themselves in need of bankruptcy protection. In these cases, debt collectors are charged with the job of making sure that individuals with outstanding debt make their payments. Recently, however, US debt collectors are receiving a lot of negative attention from the media regarding their hostile and underhanded methods of forcing people to pay.
According to some reports received by organizations such as the Federal Trade Commission and the Better Business Bureau, debt collections agencies are authorizing their employees to use collection tactics which many people believe border on harassment. Individuals have reported instances in which collectors contacted them through the social media website Facebook, leaving public and humiliating messages on their wall.
Representatives from the Federal Trade Commission have also heard of instances in which collectors assumed a fake identity on Facebook in order to collect a debt. Since the social media site allows users to choose who can see their personal information or post messages to their page, collectors have allegedly pretended to be an individual’s friend in order to gain access to their account.
Posting information about an outstanding debt in a public place is prohibited by the Fair Debt Collection Practices Act. Many consumers are wondering how and when the government will take action to stop debt collectors from using illegal strong-arm tactics.
Source: MSNBC, “Debt collectors trolling Facebook.” Herb Weisbaum, 3 May 2011
Strategies to stop credit card debt from taking over your life
Credit card debt plagues many American families, individuals, and business owners drawing them down into serious financial trouble. Due to growing credit card bills and persistent creditors, people can lose their homes and small business owners may have to put their company up for sale.
Debt is a major issue here in Colorado and across the nation, but is not an inescapable problem. By taking the right steps and honestly assessing their financial situation, many people may find their credit card debt slowly disappearing even without resorting to more drastic measures such as bankruptcy.
Laura Rowley, an expert for Yahoo Finance, recently gave an interview in which she laid out a couple strategies that could help people with large amounts of credit card debt regain control over their payments. She stresses the importance of first focusing your efforts on paying off which ever bill has the highest interest rate.
A high interest rate means the debt will continue to grow at an increasing speed the longer it remains unpaid. By paying off these bills first, consumers will save themselves a significant amount of money in the long run.
Rowley also advises people to create a “snowball” effect on their credit card payments. This means that, even after you successfully pay off your first card, continue writing a check for the same amount of money but simply add those payments to whatever you were already paying on your second card. If you have three or more cards to pay off, than continue to snowball your payments as each card’s bill is cleared.
Credit card debt can be intimidating due to the potentially life-changing consequences it can wreak upon your life. However, there are concrete steps which can be taken to address and hopefully eliminate debt. If these steps are not effective, it might be time to consider the protections offered under a bankruptcy filing.
Source: YNN, “Money Matters: Plan your attack on credit card debt.” Tara Lynn Wagner, 25 April 2011
PIRG investigation reveals banks violating fee transparency laws
Have you ever been caught off guard by a hidden fee attached to your bank-provided checking or credit card account? If so, unfortunately your experience is all too common. The results of a recent Public Interest Research Group (PIRG) “secret shopper” investigation into almost 400 banks and credit unions across the country reveals that only 38 percent of the institutions surveyed released accurate, hassle-free information regarding their fee schedules.
The PIRG investigation is entitled, “Big Banks, Bigger Fees: A National Survey of Bank Fees.” The results highlight how banks skirt around customer transparency regulations in order to convince consumers to sign up for a bank account or credit card package without fully understanding the hidden costs involved. These surprise fees, which are likely to increase over time, are one of the many factors linked to high levels of credit card debt and other financial issues.
PIRG researchers entered banks in 21 different states and feigned interest in opening an account. At some point in the process, the investigator asked for information regarding the account’s fee schedule.
The grand majority of researchers were either told that they would receive the schedule upon opening their account, provided with false information, or had to ask three separate times before a bank representative would comply with their request.
PIRG’s study concluded that many of the banks included in their investigation are currently violating transparency requirements laid out in the Truth in Savings Act. The Act mandates that all banks and credit unions honestly lay out the fees associated with their accounts before a customer joins their service.
The federal Government Accountability Office reached similar conclusions three years ago after another study also revealed many bank’s reluctance to reveal their fee schedules. If you plan on opening any type of account with a major bank or credit union in the near future, make sure you completely understand all of the fees you will be expected to pay.
Source: MSNBC, “Study: Banks hiding fee info, skirting law.” Bob Sullivan, 12 April 2011
Using credit cards to purchase basics leads to debt, says new study
While unemployment rates across the US have been slowly improving, many American families still find themselves lacking the firm financial assets to cover their day-to-day expenses and payments. These families are often forced to rely on their credit cards to pay for basic expenses, a habit which a new study has linked to a higher risk for serious credit card debt.
The investigation, conducted by Demos, studied two groups of low to middle-income families: those who carried credit card debt and those whose cards were debt free. The researchers overwhelmingly found that the families plagued by credit card debt were using their credit to pay for family necessities, thereby increasing their dependence on plastic credit and perpetuating a cycle of debt and bankruptcy.
The families that carried credit card debt were also more likely to have experienced unemployment for a minimum of two months over the course of three years. Furthermore, indebted households were less likely to have health insurance coverage for all family members.
According to the study, the average household credit card debt totals almost $10,000 dollars. Over half of indebted families clearly found themselves caught in a cycle of debt since 52 percent had been unable to pay down their debt for several years.
Families who find themselves buried in credit card debt may feel as if there’s no way out. When forced to rely on credit to make basic daily purchases, debt can accumulate very quickly. In order to escape this situation, it is often necessary to contact an attorney who can help you evaluate your options for bankruptcy protection and reorganize your outstanding debts.
Seeking help sooner rather than later may allow families to avoid becoming trapped by accumulating debt.
Source: LowCards.com, “Study Shows The Hazards of Credit Card Indebtedness.” Lynn Oldshue, 5 April 2011
Which credit card is right for me? FTC tips help consumers choose
Building off our last post highlighting the credit card difficulties experienced by Colorado residents in the Colorado Springs and Pueblo areas, we’d like to discuss an article from Money Matters, a website published by the Federal Trade Commission.
The article focuses on helping consumers choose the right credit card and emphasizes certain fees and terms of conditions which-if ignored-may cause serious financial troubles such as bankruptcy.
In order to figure out which credit card company offers the best deal for your current fiscal situation, the Federal Trade Commission recommends that consumers pay close attention to the following things:
- A credit card’s Annual Percentage Rate (APR), or the yearly cost of securing the line of credit. The higher this percentage, the more annual interest a card holder will have to pay on their credit charges. Companies are required to reveal a card’s APR before activating a consumer’s account.
- Grace periods, offered by some credit card companies, allows a user to evade certain charges by paying their full balance by its due date. Companies which don’t offer grace periods may require consumers to pay finance charges. If a company does impose a finance charge it is also important to discover how that charge will be calculated as this can make a large difference in your total bill
- Extra fees such as those charged to secure a cash advance or make a late payment can vary greatly from card to card. In addition, some companies will charge a membership fee, which they may refer to as a participation or activation fee. It is important to be aware how much these fees will cost, how often they will be charged to your account, and how they will affect the amount of credit available at any given time.
Credit policies can be very different depending on the company providing the card. All these fees and conditions often make it very confusing for consumers, especially first-time credit users, to choose a credit plan. However, knowing the terms of use which apply to your specific program is vital in helping consumers avoid becoming trapped by credit card debt.
Source: Money Matters, “Choosing Credit Cards.” Federal Trade Commission.
Colorado Springs and Pueblo area residents spotlighted for high debt
In a previous post, we noted a study conducted by the organization Credit Karma which applauded Colorado residents for lowering their credit card debt by an average of nine percent during 2010. While the state as a whole may be practicing successful debt management, a new study suggests that the same cannot be said of the area surrounding Colorado Springs.
Experian-a national credit reporting company-listed the Colorado Springs and Pueblo region one of the foremost areas for credit card debit in the nation. According to Experian’s research, the outstanding credit card balances held by residents of this area were the 15th largest in the nation in December 2010. In addition, residents generally make payments towards reducing these large balances at a slower rate than the rest of the country. Combined, these two trends create the kind of financial trouble which can eventually lead to payment defaults and bankruptcy.
Although Experian reports that residents from the Colorado Springs-Pueblo area actually reduced their average credit card balance by one percent compared to 2009 figures, the total remains almost seven and a half percent higher than the national standard.
In the same study, this region ranked 29th highest credit balance in the nation during 2009 and 64th during 2006. These numbers indicate that residents have steadily increased their credit spending at a higher rate than the rest of the nation.
The director of public education at Experian cites unemployment as a potential reason why residents struggle to lower their credit card balances. The unemployment rates in December 2010 for both Colorado Springs and Pueblo were higher than any of Colorado’s other large metropolitan areas. Combined, unemployment in the two areas is also slightly higher and the national average.
Source: The Gazette, “Colorado Springs ranks 15th in credit card debt.” Wayne Heilman, March 3 2011.
Could easier credit score access help Americans stay out of debt?
An interesting bill introduced into the House of Representatives by Rep. Steve Cohen of Tennessee may help consumers avoid credit card debt. The bill allows everyone to receive a free copy of their credit score on an annual basis. Representative Cohen argues that, as it stands, consumers only receive credit score information when they are denied a loan or turned down by a credit card company.
Cohen hopes that regular reports would provide an added reminder for citizens to correct their spending habits before their credit score reaches such a low point. As most consumers know very well, a good credit score can help secure better interest rates on things such as mortgages and credit cards. Furthermore, lower interest rates help consumers avoid becoming trapped in a cycle of personal debt.
Currently, consumers must pay for information regarding their credit score from a variety of reporting companies or wait until they need to buy something with credit and are rejected. Some bankruptcy scholars and experts agree with Representative Cohen that this structure may be exasperating the problems many Americans have managing their debt.
However, critics doubt that delivering individual credit scores will truly make a difference. Opponents could argue that, if the measure is ineffective at reducing debt, it will become another expensive bureaucratic measure which will further drain sparse federal funds.
In addition to the credit score provisions, the bill also requires the federal Government Accountability Office to reevaluate how bankruptcy-risk scores are developed. Bankruptcy-risk scores are another factor used to determine how likely it is that someone will file for bankruptcy. Representative Cohen and the bill’s other supports believe that increasing the visibility of bankruptcy-risk and credit score reports may help solve America’s debt problems.
Source: The Commercial Appeal. “Bill calls for free consumer access to credit report.” Bartholomew Sullivan, 18 February 2011.
Colorado credit card debt lower than national average
Colorado consumers have something to celebrate. According to Credit Karma’s US Credit Score Climate Report, residents of the Centennial State decreased their average credit card debt by nine percent over the course of 2010.
Credit Karma’s report revealed and eight percent nationwide decline in credit card debt, placing Colorado slightly ahead of the national curve. According to the study, the average credit card debt for US consumers is slightly over $7,000 dollars. Families and individuals who cannot support such a high level of debt may have to consider filing for bankruptcy protection.
Other states that, like Colorado, achieved a significant decreased in credit card debt include California, Connecticut, Indiana, Oklahoma, Tennessee, Nevada, and Wisconsin.
Credit Karma also reports that national credit scores currently sit at 668. While Massachusetts and New Jersey have managed to obtain outstanding credit averages as high as 686, Arkansas maintains with the lowest national score at 641.
Louisiana received a mention as the state with the most improved credit score, moving from 639 to 647.
These numbers are an encouraging sign that Americans are beginning to gain control of the debt issues which have become a serious problem throughout the nation. The findings are especially welcome in light of the many reports released at the close of 2010 which stated that American debt was actually on the rise and predicted a dismal start for 2011. In an earlier blog post from December, we relayed a CardHub report that American credit card debt had actually increased significantly in the previous quarter.
Yet, Credit Karma’s findings suggest that this end of the year setback did not prevent the nation from achieving year-long credit debt reduction. However, with national credit card debt still as high as $7,000 dollars, debt and bankruptcy issues remain a problem for many people. If you find yourself overwhelmed by your debt problems, you should contact a qualified attorney who can help you evaluate your options.
Source: ACA International. “Credit Card Debt Decreased Eight Percent in 2010.” 19 January 2011.
Americans May be Aware of Debt, But Research Shows We Have not Stopped
Americans during this economy have become extremely aware of the fact that the country is in debt, and even more so, a significant number of individuals have felt the financial strain. Even while the income that a lot of people bring in each month is barely enough to cover the necessary bills, one study shows that Americans have again begun to slip further into individual debt.
American citizens have collectively experienced a $6.5 billion increase in the amount of credit card debt accumulated in the past quarter year. According to CardHub.com, most of the debt calculations fail to include the amount of debt that banks have charged off. Researchers took a second look at the data reported by the Federal Reserve and found that in the past few quarters, banks had charged off about 8.5-10.9 percent of their debt, and when debt is in the millions, that amount can be extremely large.
CEO of CardHub reported that “the alarming part is in this quarter, Americans got $6.5 billion more in debt, and if you look at the increase in debt between the second and third quarter combined, that’s 11% higher than the increase last year.” Researchers cited the fact that Americans had managed to reduce a portion of their debt in early 2009 and 2010, but that as the year went on, debt repayment was down 9 percent.
Predictions made based upon the report estimate that by January 1, Americans will have completely canceled out the debt repayment progress they made in the past couple years.
Source: Wallet Pop “Research Shows We’re Digging Ourselves Back Into Debt” Martha C. White 12/8/10
Citizens Bank Says You Don’t Have to Avoid Black Friday, Just Spend Wisely
During an economic recession, customers simply do not get as excited about shopping when a lot of people they know are facing problems like credit card debt and are even considering filing for bankruptcy protection. However, with the prospect of Black Friday’s sales, consumers are once again excited to spend and save. Financial experts predict a 2.3 percent spending increase during this holiday season than last years, but they also warn that the Black Friday sales could lead to overspending.
Citizen Bank has offered a few tips that will help control consumer spending during the holiday season so that you do not wake up with a financial hangover as you look at your bank accounts and receive the credit card bills that have combined all of your holiday expenditures.
There are a few simple tips that can help a consumer think before they spend.
- Tip #1: Make a budget. There is no better way to prevent yourself from overspending than creating a budget that lets you know exactly how much money you can afford to spend.
- Tip #2: Make a List. Create a checklist for every single item you want or need to purchase before ever leaving your home. If you can use self-control and avoid impulse spending, you will not be surprised by the total dollar amount later.
- Tip #3: Leave some credit cards at home. When shopping, if you only have a couple credit cards with you, you will not be tempted to spread out the costs.
- Tip #4: Use your debit card. Using a debit card takes the money out of your checking account immediately. It is harder to remember spending totals and set aside money for an unusually large credit card bill than to immediately withdraw the funds so you do not accidentally spend them before the bill arrives.
- Tip #5: Choose Layaway. A lot of retailers have returned layaway programs that help shoppers spread costs over a number of months.
Lastly, write down all of your credit card information before you leave for the store. It is better and easier to be prepared for a stolen wallet or purse than it is to remember what was in it should you become an unfortunate victim of theft.
Source: Connecticut Business News Journal “Citizens Bank offers holiday shopping tips” 11/23/10