EAST PROVIDENCE, R.I. (WPRI) – Americans have a lot of consumer debt: $12.73 trillion to be exact.
The record-breaking consumer debt tops the previous debt record, $12.68 trillion, that was reached during the recession in 2008.
According to the Federal Reserve Bank of New York, about 71% of our debt is for mortgages or home equity loans, 10.6% for student loans, 9.2% for auto loans, and 6% for credit cards.
“Credit card debt is going up partly because the economy is doing pretty well and people feel better,” said personal finance expert Jordan Goodman. “When consumer confidence is high, they go and spend.”
Credit card debt totals $764 billion, according to the Federal Reserve. Though data shows a dip in credit card balances in the first quarter of 2017, the annual change in credit card debt is (+) $52 billion.
Goodman says all too often, spending outpaces a person’s income, making credit card debt difficult to pay off.
“Credit card debt is very, very high interest rate,” Goodman said. “Typically 13% is the average, and if you’re late it can be 30%”
So Call 12 for Action asked Goodman for advice to drive down the credit card debt.
“First of all, you can get better credit cards,” Goodman said. “You do not have to be putting up with 18% or 25% [interest rates].
“The second thing you want to do is go to a nonprofit credit counseling organization,” he added. “Consolidate all of your credit cards with them. Make one payment to them. They pay the creditors, and depending on how much debt you’ve got, in two, three, four years you can be out of debt and it’s considered a neutral on your credit score.”