Research of the Week: Will Traditional Banks Tank?

The brick-and-mortar bank may perish before you do.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

A high-tech venture capital firm called Blumberg Capital polled more than 2,000 adults about their opinions on where they keep their money. The results made the firm very happy, for reasons you’ll soon see.

The big result

Are Americans confident about their checking and savings accounts? Don’t bank on it.

“Three of five Americans believe that their banks are failing to keep up with their needs in today’s connected world, leading many to wonder if traditional financial institutions will disappear,” Blumberg researchers concluded.

The top reasons…

• 80 percent said banks “need to focus more on helping the average consumers and small business owners rather than the top 1 percent and big business.”
• 79 percent “want access to flexible borrowing options that minimize their interest payments,” which they say they’re not getting.
• 76 percent believe banks don’t care about those with low FICO scores or bad employment histories.
• 62 percent “feel they pay way too much interest on debt.”

So what will replace your bank? That’s where it gets interesting.

The fascinating details

Most adults want not only better customer service and financial incentives, they want banks to embrace reliable technology – known as “FinTech” in the banking industry.

For example, 74 percent of those polled by Blumberg “agree that it would be helpful if there was an automated and customized way to make sure they never miss a payment and always minimize the total interest expense on their loans.”

Then again, most Americans don’t trust banks to use this FinTech safely. Almost the same number (72 percent) said, “They worry about with the new banking services online and they are not completely confident their financial information is secure or private.”

What you can do

If you’re unimpressed with the rates and fees your bank offers and charges, consider moving your money to a credit union. There are pros and cons, but many Americans are finding the good outweighs the bad. Learn more by watching Consolidated Credit’s video Credit Unions vs. Banks.

If you want to dabble in Fintech just a bit, you can try online calculators and budgeting programs. Check out Consolidated Credit’s Simple Savings Calculator, then consider using free programs like Mint and Power Wallet, which help you save money by visualizing where you spend it.

Of course, those are just tiny steps toward truly online banking, and Bankrate offers a good tutorial on how they work. Finally, you can meld old and new tech by calling Consolidated Credit at [PHONE_NUMBER] or applying online for a free debt analysis from a certified credit counselor.

Research of the Week: United We Stand in Debt

Regardless of your political leanings, we’re all in the same race with debt.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

With the 2016 election just days away, Lending Club put together an interesting infographic look at the state of household debt in the U.S. to see if there was a difference in debt levels between red and blue states.

The big result

Household debt has risen significantly since the last election – from $10.56 trillion in 2012 to $12.29 trillion this year. Depending on your political leanings you either see that increase as…

1. A sign Americans are more confident in the economy, and are therefore more willing to borrow
2. A sign that Americans are stretched thin and are being forced to borrow to cover budget gaps

There’s actually consumer data available to prove both sides of that argument (here’s the positive outlook and here’s the negative).

The fascinating details

While blue states have the highest average personal loan and credit card balances versus red states and battleground states, red states have higher average delinquency rates on personal loans.

What you can do

So really, the conclusion is that regardless of your politics, chances are high that you’re facing at least some challenges with debt.

“The thing that jumps out at me when I look at this infographic is not where the debt is, but how much of it there is everywhere,” says Gary Herman, President of Consolidated Credit. “The majority of states have personal loan balances of $6,000 or more and revolving credit card debt balances over $5,000. That’s too much debt, period.”

Even if you’re on the side that believes the economy has bounced back completely and you’re borrowing because you have confidence that the economy will remain strong, carrying such high debt levels creates risk you don’t need.

“Any excess of debt creates financial risk in your outlook,” Herman continues. “No matter which party wins on Tuesday we can expect at least some fluctuations in our economy over the next four years. It’s up to each individual to protect their own interests and take steps to keep personal debt low.”

If you have excess credit card debt and personal loans, it may be time to consolidate. There are debt consolidation solutions to help unsecured personal loans, credit cards and other revolving debts. You can also find consolidation options for student loans if that’s the type of debt that’s holding you back.

For more information, call Consolidated Credit today at [PHONE_NUMBER] or complete an online application to request a free debt and budget analysis from a certified credit counselor. Together you can identify the right option for debt relief to fit your debt and your needs. You can also complete an online application to request help now.

Research of the Week: What Type of Saver Are You?

New analysis divides Americans into 4 groups based on saving sentiments.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

The CFP (Certified Financial Planners) Board conducted a national survey about Americans’ feelings about personal savings. The study essentially assigns people to a class of savers based on how you look at and approach saving.

The big result

By and large all Americans feel like saving is extremely important or very important, but we diverge in our ability – or perceived ability – to save money.

1. Confident Savers make up 22% of the country. They are optimistic, secure and generally happy with their efforts when it comes to saving.
2. Concerned Strivers represent 27% of the people in the U.S. They are generally optimistic about their ability to save, although they’re still working to achieve results.
3. Tentative Savers make up 24% of the country and while they’re optimistic, they also tend to be plagued by uncertainty and financial concerns.
4. Stretched Worriers make up the last 26% of the country. They’re uncertain, concerned, anxious and worried about their ability to save effectively. This is the only segment where saving is not a priority because they’re more focused on keeping up with bills and paying off debt.

The fascinating details

Here’s how each group breaks down when it comes to saving consistently:

• 88% of Confident Savers always save money every month
• 77% of Tentative Savers also save money every month
• 48% of Concerned Strivers save every month, while 51% save sometimes
• Only 34% of Stretched Worriers save sometimes, and 66% do not save

For the first three types of savers, although debt elimination is an important part of an effective saving strategy, elimination does not take precedence over saving entirely:

• Concerned Strivers say credit card debt repayment is their top priority
• Confident Savers and Tentative Savers both rank mortgage debt and credit card debt as equally important when it comes to debt repayment

When it comes to saving for retirement:

• Confident Savers and Concerned Strivers both, on average, start saving for retirement before age 30
• Tentative Savers also start saving at or around their early 30s, but they are more concerned about retirement savings
• Stretched Worriers start saving the latest at around age 36, on average, and are the least confident; retirement savings is an equal priority to emergency savings for this group

What you can do

“The main goal of any saving strategy is consistency,” says April Lewis-Parks, Financial Education Outreach Director for Consolidated Credit. “Even saving just a few dollars every month gets your savings headed in the right direction and helps you develop a health saving habit. Saving something, even if it doesn’t seem like a large amount of money, is better than saving nothing. The first step is to get started.”

Regardless of which kind of saver you think you are, debt elimination is likely causing a decrease in the amount you have available to save. Consolidating your debt reduces the amount of income you have to use for debt elimination, freeing up more money to save.

“A debt management program can reduce your total monthly credit card debt payments by 30 to 50 percent,” Lewis-Parks explains. “That provides an immediate boost to free cash flow that you can turn into a recurring transfer to your savings account.”

Setting up an automatic recurring transfer or asking your HR department to split your direct deposit between checking and savings can help you save effectively, because it makes savings automatic. That way, you don’t have to remember to save because it’s already factored in.

For more information on debt elimination and how to use consolidation to improve cash flow, call Consolidated Credit today at [PHONE_NUMBER] or complete an online application to request a free debt and budget analysis from a certified credit counselor. You can find more savings tips in Consolidated Credit’s free Guide to Saving Effectively.

The post What Type of Saver Are You? appeared first on Consolidated Credit US.

Research of the Week: Savers, Spenders, and Love

Don’t let money ruin your relationships.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

Everyone knows couples fight about money. But what happens when young lovers first meet? What role does money play? That’s what the investment firm TD Ameritrade wanted to know when it conducted its annual Millennials and Money Survey.

The big result

When it comes to love and money, opposites don’t necessarily attract – and when they do, it can be a volatile combination.

TD Ameritrade interview more than 2,100 adults and asked them to identify themselves as a “spender” or “saver.” Not surprisingly, around 60 percent of men and women who called themselves savers sought spouses who also were good at saving. The big reason was obvious: “One benefit 6 in 10 Savers noted for being married to another Saver is that it prevents arguments.”

What about those who called themselves spenders?  Men and women acted very differently: “A majority of Spender women (59 percent) married a Saver spouse, as opposed to 39 percent of Spender men with a Saver spouse.”

The fascinating details

As you might expect, Millennials and Baby Boomers have different ideas about love and money…

• “Two-thirds of Boomer Savers are married to Savers, compared to 52 percent of Millennial Savers”
• “40 percent of Boomer Savers say they would not be happy in a relationship with a Spender vs. 23 percent of Millennial Savers.”

Even among Millennials, there’s a gaping gender gap when it comes to saving money. For instance, nearly two-thirds of women are saving for an emergency fund. Men? Only half.

What you can do

Well, one thing you shouldn’t do, according to experts, is break up with the love of your life just because they’re a spender.

“It’s more about attaining the right balance than finding an identical match,” says Matt Sadowsky, TD Ameritrade’s director of retirement. “It’s not critical that both spouses be spenders or both be savers. But it is critical that there is an open dialogue between the two.”

Indeed, Consolidated Credit president Gary Herman says he’s seen savers reform spenders.

“If couples talk openly about not only how they spend, but what their lifelong goals are, then saving becomes a specific task instead of a general idea,” Herman says. “It’s much easier to resist the temptation to open your wallet when you want to have a child in the next year, or go back to college to enhance your career.”

Of course, Herman has also seen the flip side: Spenders luring savers to the dark side.

“Without that honest money conversation and at least some basic budgeting, savers run the risk of giving into their spending spouses,” Herman says. “The results can be devastating. I’ve seen it for myself these past two decades here at Consolidated Credit. Luckily, we have the experience to not only get these couples out of debt, but keep them out of debt in the future.”

Consolidated Credit has put much of that knowledge into a special report called Love & Money: Good Finance without the Fights. Check it out, and call [PHONE_NUMBER] for a free debt analysis from a certified credit counselor.

The post Savers, Spenders, and Love appeared first on Consolidated Credit US.

Research of the Week: 2016 Holiday Shopping Expectations

What we can expect out of the winter holiday shopping  season this year.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

The National Retail Federation is the preeminent source of U.S. retail shopping data. Now they’ve released their 2nd annual Retail Holiday Planning Playbook to help retailers identify key trends. As a consumer, you can use this to help you strategize for a more frugal holiday.

The big result

If last year is any indication, this year we can expect to see records numbers of online sales. More than half of consumers increased the amount of holiday shopping they did in 2015.

Holiday sales increased by 3 percent in 2015 to $621.1 billion, and 7 in 10 retailers increased their overall revenue. Additionally, 81% of retailers saw an increase in online sales, compared to just over half seeing an increase in-store.

The fascinating details

Not only do consumers seem to be focusing more on online shopping, they’re specifically increasing mobile usage.

• Mobile sales, including phone and tablets, made up 30.4% of all online sales; that’s compared to 25.9% in 2014
• Retail purchases on smartphones accounted for 19.9% of sales in 2015, compared to 14% in in 2014
• 56% of holiday searches were conducted on a mobile device
• Average transaction amounts were also higher using technology:
  • $114 was the average computer purchase
  • $89 was the average on tablets
  • $80 was the in-store average
  • $70 was the average smartphone purchase price
• 68% of retailers reported their highest sales revenue on record for Black Friday 2015
• While Cyber Monday has the highest online sales overall, 1 in 4 retailers reported their Black Friday online sales total was higher

What’s more, retailers are taking this increased focus on online and mobile shopping to heart. You can expect to see even more marketing targeting you online and on your social networks this year.

• 84% of retailers want to increase their conversion rate – i.e. they want to increase the number of users who eventually buy something once they land on a website.
• 71% want to increase traffic, meaning they want to drive more users to their website.

They will also tailor their strategies to what customers consider as the most important online shopping factors:

• 47% of consumers say free shipping in one of the top factors in purchasing decisions for the holiday season
  • 56% of shoppers who abandoned a cart did so because shopping costs were more than expected
  • 45% abandoned their cart because the order wasn’t big enough to qualify for free shipping
• 85% of online shoppers are willing to wait 5 days for delivery
• Buy online and pick up in store offers are also on the rise – these types of sales increased from 57% to 68% from summer to Holiday 2015
• 88% of shoppers now trust online reviews as much as personal recommendations

What you can do

Expect to be targeted by really tempting online advertising anytime you log on to a computer or mobile device before the end of the year. And understand that online advertising is smart. Retailers want to hit as many “touchpoints” as possible in order to drive you to purchase.

You’ll notice that if you go to a particular online store, then the ads on your search engine and other webpages you visit are likely to be promoting whatever you searched for on that site. The ads on your social networks are likely to change, too. This is done strategically with the idea that if you saw an item and considered it, putting it in front of you several more times will increase the likelihood that you’ll go back and purchase it.

If you understand this type of retail advertising strategy, you can temper that temptation to make sure you stay on budget this year. Follow these tips to be successful:

1. Plan your holiday budget as you normally would.
2. Pay particular attention to gifts, especially those with a higher price tag.
3. Start looking up those items online and comparison shop for the best price.
4. Sign up for email newsletters of sales and follow your favorite stores on social networks.
5. This strategy will help you take note of sales on all of the items on your list.
6. When you see a particularly good price on an item, click through the ad and purchase it.
7. Also make sure to take note of coupon codes and exclusive offers made to social followers and email recipients.

The post 2016 Holiday Shopping Expectations appeared first on Consolidated Credit US.

Research of the Week: HELOC Domino Effect

Study finds missed home equity payments are a sign of trouble to come.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

Home Equity Lines of Credit (HELOCs) are a financial tool available to homeowners, where they are able to borrow against the equity built up in a home. In a typical HELOC, payments start low and only cover interest charges. However after a set period of time (usually 10 years) payments increase to cover interest plus principal.

The Wall Street Journal recently released an investigation into missed HELOC payments and what it means for a borrower’s overall financial outlook.

The big result

The study looked at HELOCs that ballooned between December 2014 and March 2015. Ballooning refers to when an interest-only payment changes to being covering interest plus principal.  Looking at borrowers whose payments jumped by at least 20%…

Almost 2 out of every 100 borrowers (1.9%) were more than 90 days behind on HELOC payments by the end of the year.

The fascinating details

What’s more concerning is that those who fell behind with HELOC payments also started to fall behind on other payments as well:

• 40% of delinquent HELOC borrowers also feel behind by at least 3 months on their primary mortgage
• 5% fell behind on credit card payments

All of those numbers are up from previous years. Previously, only 0.1% of HELOC borrowers fell behind in their balloon year. And of those, only 12.5% also fell behind on a mortgage and 18.5% fell behind on credit cards.

What this means

“HELOCs that are ballooning now were for debts taken out prior to the Great Recession,” explains Maria Gaitan, Housing Director of Consolidated Credit. “The loans evaluated in the study would generally be from December 2004 to March 2005. With that in mind, this increase in HELOC delinquencies may be the lingering effects of over-borrowing prior to the collapse. However, such a sharp increase in the number of delinquencies happening now is a cause for concern.”

Prior to the recession, homeowners were possibly a little too comfortable borrowing against the value of their homes. Basically, equity in many key metropolitan areas skyrocketed just prior to the collapse and so homeowners effectively borrowed against bubble equity. When property values plummeted, many households were left in a financial lurch.

What you can do

If you already have a HELOC that hasn’t ballooned yet…

“If you’re still paying interest only on a HELOC taken out before the Great Recession, start planning now so you can get your budget ready for the balloon,” Gaitan encourages. “As the study shows, payments often increase by 20% or more, which can spell big problems for your budget if you’re not ready.”

Gaitan says the best thing you can do to offset that increase is to pay off credit card debt prior to the reset date. The more credit card debt you pay off, the lower those bills will be, giving you more cash flow to cover HELOC payments when they start to include principal.

“Cutting out one or two credit card obligations may give your budget the boost it needs to handle higher HELOC payments. Otherwise, you’re at high risk to end up juggling bills and facing financial distress where you can start to miss payments.”

If you’re considering a HELOC…

“Borrowing against the equity in your home can be tricky and risky,” Gaitan continues. “It’s difficult, because real estate bubbles and market fluctuations have significant effects on equity. It’s also a financial risk because HELOCs are secured debt. In other words, if you default you could be facing foreclosure.”

Gaitan recommends that other lending and financing options should be explored thoroughly before you consider borrowing against your home. If a HELOC seems like the best option, make sure to borrow responsibly and don’t just take out a bigger line of credit because it’s available during a real estate bubble.

If you have questions about your home equity and how HELOCs work, call 1-800-435-2261 to speak with a HUD-certified housing counselor free of charge.

The post HELOC Domino Effect appeared first on Consolidated Credit US.

Research of the Week: Holiday Spending Stress

Getting gifts is fun, paying for them is nearly impossible.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting studies

This time of year, pollsters love to ask Americans how much they’re spending on the holidays. This year, according to the National Retail Foundation, the average is a few cents over $935. But how do we feel about spending that much?

Two new studies – one by the credit bureau Experian and the other by SunTrust bank – tell us the same thing… Americans are not full of holiday cheer when it comes to spending.

The big results

SunTrust reports, “43 percent of Americans feel pressure to spend more than they can afford during the holiday season.” That’s up 4 percent from 2014, when SunTrust first posed the question.

The pressure those Americans feel is peer pressure. It’s the belief they need to buy expensive gifts or be judged as cheapskates by friends and family.

That might be why Experian’s results produced more uncomfortable stats. “Fifty-six percent of those surveyed say they spend too much during the holiday season, while 55 percent say they feel stressed about their finances during the holidays.”

The fascinating details

The leading cause of that financial stress is a willful disregard for budgeting, Experian says…

“The primary reason is that most consumers don’t create budgets and are unprepared to cover added expenses beyond gifts, such as postage costs, hostess gifts, gift-wrapping supplies and greeting cards. Failure to develop a budget (62 percent of survey respondents) is a main detractor from holiday enjoyment.”

SunTrust asked how financially stressed-out holiday shoppers deal with the stress. Sadly, 33 percent replied “eating” – which not only adds to your waistline but also your debt.

What you can do

It’s not too late to relieve the stress and the debt. Here are three easy steps…

1. Embrace technology. No, don’t buy more high-tech presents. Use SunTust’s holiday budgeting calculator to cut costs.
2. Budget online. Sign up for a secure and easy-to-use online budgeting tool like Mint or Power Wallet. Both do the same thing: Let you tinker with your budgets at the click of a keyboard, instead of laboriously writing out pages or typing in computer spreadsheets.
3. Study up. Check out Consolidated Credit’s Holiday Survival Guide for a multimedia look at dozens of ways to save big.

The post Holiday Spending Stress appeared first on Consolidated Credit US.

Research of the Week: Upside Down Auto Industry

Record number of trade-ins “upside down” as buyers seek new wheels.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

A new report in USA Today reveals a pronounced financing gap in the auto industry. According to Edmunds.com, a record number of car buyers are coming in with trade-ins that are upside down. In other words, their old car isn’t even worth enough to cover the remaining balance on their previous auto loan.

The big result

Nearly one third (32%) of all vehicles brought onto dealership lots as trade-ins are upside down. This means instead of getting money off on a new vehicle purchase, these car buyers actually OWE money. The difference between the balance remaining on the loan and the car’s value must be added to the purchase price.

The fascinating details

It’s not unheard of for car buyers to come in upside down. The previous high was set in 2006 when 29.2% of buyers were upside at the time of a new vehicle purchase. Interestingly enough, the lowest percentage was hit in 2009 during Great Recession; only 13.9% of car buyers were upside down.

Edmunds.com also provided some additional statistics on the state of consumer car buying:

• The average term on a new car loan is 68 months.
  • For subprime buyers with credit scores in the low 600s, the average term goes up to 72 months.
• The average selling price of a new vehicle is at a record-high $34,000.
• A record number of vehicles are being leased. Leases now account for 30% of all vehicle sales.
• The 60-day delinquency rate on subprime loans hit 5.05% in September.
  • Delinquency rates hit 5.04% in 2009 when unemployment was around 10%.
  • Prime borrowers only have a delinquency rate of 0.44%
• Dealers are also offering record-high purchase incentives. Incentive spending hit $3,886 in November – second only to the $3,939 incentives seen in September of this year.

What you can do

The trouble that experts see is a combination of several factors listed above. Sale prices are rising; as a result, many buyers have to finance larger amounts to get today’s top vehicles. So consumers are taking out larger auto loans.

At the same time, buyers with subprime credit scores are getting longer and longer terms. While extending the term on a loan lowers the monthly payments, it also means the principal owed on the car is reduced slowly. In many cases, the car depreciates in value faster than the principal on the loan is paid down. This is how buyers end up upside down auto trade in.

“Too often, buyers focus solely on achieving the lowest monthly payments on the car they want,” says Gary Herman, President of Consolidated Credit. “They don’t consider the long-term effects of borrowing more by extending the term on an auto loan to up to 6 years.”

Herman says car buyers need to pay more attention to total cost, instead of focusing wholly on the monthly payment. This applies to both car buyers and people who prefer to lease.

“Just because you can walk into a dealership with $0 down and qualify for a 72-month loan on a $34,000 car, it doesn’t mean you should,” Herman explains. “Car buyers need to take extra steps to calculate total cost and compare loan payoff to depreciation.”

For more information on how to effectively manage auto loans, visit Consolidated Credit’s free Guide to Managing Auto Loan Debt.

The post Upside Down Auto Industry appeared first on Consolidated Credit US.

Research of the Week: Financial Literacy Fail

More than 77% of adults reside in states that score a “C” or worse.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

Financial literacy is critical in helping households achieve and maintain financial stability. Unfortunately, given that most state curriculums don’t include financial literacy courses financial knowledge is often left up to consumers. In other words, they either have to seek education themselves or leave key financial choices up to guesswork.

Now, the Center for Financial Literacy at Champlain College has put together a National Report Card on Adult Financial Literacy.

The big result

Most Americans don’t have a financial literacy level necessary to effectively make the right financial choices for their lives. Residents in Mississippi outright failed the test with a final grade of 57.09%. Another 11 states scored somewhere in the “D” range:

1. South Carolina – 69.72%
2. Kentucky – 69.48%
3. New Mexico – 69.39%
4. West Virginia – 69.19%
5. Texas – 67.72%
6. Georgia – 67.33%
7. Florida – 67.19%
8. Alabama – 66.09%
9. Oklahoma – 65.72%
10. Arkansas – 65.01%
11. Louisiana – 63.18%

In fact, out of all 50 states, only Minnesota (92.38%), North Dakota (91.85%) and Utah (91.2%) scored in the “A” range.

The fascinating details

The Center for Financial Literacy’s interactive map (which we highly recommend) has a variety of factors you can compare that add up to overall financial literacy. Categories include:

• Financial Knowledge Grade – where 3 Pennsylvania, Texas and California all failed
• Credit Grade – where 11 states managed to score an A- or better
• Savings and Spending Grade – where most states outside the south scored well
• Retirement Readiness Grade – where 9 states failed and only 1 had an A
• Protect and Insure Grade – where 3 states failed and only 4 got an A

Of those five measures, most adults seem to struggle the most with retirement readiness. Saving and spending grades tended to be better, meaning most Americans understand how to budget and save even if they may not be implementing those strategies in their daily lives.

What you can do

“Building financial literacy is essential for families who are working to achieve stability,” says April Lewis-Parks, Financial Education Director for Consolidated Credit. “When it comes to finance, knowledge really is power.”

The following resources can help you get started:

• Financial Literacy Test: Take a quick 20-question financial literacy test to see where you stand and where you can afford to improve your knowledge.
• Financial Literacy 30-Day Checklist: Take one action each day to build your way to a better financial outlook. In just 1 month we can help improve your finances.
• Credit Dojo: This interactive financial education course walks you through key topics from basic budgeting to how to manage home equity.

The post Financial Literacy Fail appeared first on Consolidated Credit US.

Research of the Week: Average Credit Card Debt at $16K

Consumers increasingly turning to credit cards to cover budget gaps.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

A new report from NerdWallet featured on CNBC explores annual consumer debt levels in the U.S. from 2002 to 2016. The report reviews data from the Federal Reserve Bank of New York and the Census Bureau. The results are telling.

The big result

The average American household has a total credit card balance of $16,061. That’s just shy of the record high reached in 2008 just prior to the recession.

The fascinating details

Total household debt is now 1½ times what it was in 2002. Including mortgages, households carry $132,529 in debt. That’s a significant increase from 2002 when average debt leveled out at $88,063.

NerdWallet argues that the root cause of the increase stems from the gap between cost of living and wages. Income has only grown by 28% in the past 13 years, while cost of living increased by 30%.

They also say the problems aren’t helped by credit cards themselves, which now carry an average interest rate of 18.76%. Households pay an average of $1,292 in credit card interest charges per year.

Paired with increasing auto, student loans and medical debt, you have a perfect storm of over-borrowing in many households. In fact, medical debt expenses have risen by 57% since 2003.

Interestingly enough, although credit card debt levels are high, it’s not the biggest source of borrowing trouble for most Americans. In 2007 just before the Great Recession, credit card debt made up a much larger percentage of total indebtedness. Now, credit cards are vastly outweighed by mortgages and student loans.

“Next year, Americans need to stop spending and prioritize debt repayment,” says Gary Herman, President of Consolidated Credit. “We learned a hard lesson in 2008 about how the burden that’s created when households borrow too much. If American families don’t tighten their belts, we could be facing a repeat of challenges faced during the Great Recession. And that’s regardless of what happens to the economy in the coming years.”

What you can do

If debt repayment needs to be a priority for you next year, here is a handy quickstart guide to help you take action:

1. First assess your personal debt to income ratio to see where you stand – a ratio of 36 percent or less signifies you’re financially stable
   1. Also check your credit card debt ratio, by comparing your total monthly payments to your monthly income; this ratio should be 10 percent or less
2. Review your budget to free up as much cash as possible for debt elimination, then decide on the best way to reduce your credit card debt:
   1. First consider a debt reduction strategy that you can do on your own
   2. If you can’t develop a plan that eliminates all of your debts within the next 3-5 years, consider options for debt consolidation
   3. If you have bad credit and can’t consolidate on your own, contact a credit counseling agency to see if you’re eligible for a debt management program.
3. Once you have a plan to eliminate your credit card debt, work on any student loan debt you have next:
   1. Consolidate federal student loans with a Federal Direct Consolidation Loan
   2. Then, if you’re struggling to make the payments, use an income-based Federal Repayment Plan to reduce your payments so they work for your budget.
   3. For private student loans, you can consolidate them together with a private student debt consolidation loan. Just make sure to only consolidate your private loans this way – if you use this for federal loans, they become ineligible for federal programs.
4. Now that you have the two most common “problem children” of your consumer debt under control, reevaluate your debt-to-income ratio to see where you stand.
   1. If need be, refinance your auto loan to reduce the term so it can be paid off faster. The faster you eliminate the debt, the more money you save on interest charges.
   2. Also, if you haven’t done so already, look into refinancing and loan modification programs offered under HAMP and HARP from the federal government.

The post Average Credit Card Debt at $16K appeared first on Consolidated Credit US.

Research of the Week: Are You Living in a State of Debt?

New map identifies the most and least indebted borrowers by state.

The interesting study

Creditcards.com released a new interactive map that shows debt burdens by state. It includes months to pay off and interest charges, along with stats like average balance and the 90-day delinquency rate. More importantly, the study compares average credit card balance to the median income in each state. The results are telling.

The big result

The average American has too much credit card debt, regardless of where they live. Residents in states like Wisconsin, Iowa and North Dakota have some of the lowest burdens with balances below $5,000. However, when compared to median income levels, it’s still too much debt.

The fascinating details

Your credit card debt ratio measures the amount of credit card debt you have relative to your income level. The CreditCards.com study says cardholders should use no more than 15% of their monthly earnings to pay off debt. However, experts from Consolidated Credit say this is actually high for most families.

“For most households, credit card payments should take up no more than 10 percent of net monthly income,” explains Gary Herman, President of Consolidated Credit. “That provides enough breathing room for families to avoid credit dependence. Otherwise, you may have more money to eliminate debt, but you may be in a situation where you have to make new charges to cover other needs.”

So let’s look at the state that CreditCards.com says has the lowest debt burden – North Dakota.

• Credit card users have an average balance of $4,599
• Their median earnings are $34,336 per year, or $2,861 per month
• com says the average family would have $429 to use for credit card debt repayment
• However, if you calculate it at 10% instead of 15% then the total amount available for repayment is only $286
• If you have a $4,599 at an average interest rate of 18% APR, it will take 19 months to pay off your debt; you will pay $703.79 in total interest charges.
• So the time to payoff is 7 month longer with a truly balanced budget

What you can do

In two words: Debt consolidation

According to another recent study from NerdWallet, households are reaching “unsustainable” debt levels. Essentially, this means most households can afford to repay their debt efficiently using traditional means. As a result, you can make payments month after month, but never really make headway to eliminate your debt.

Debt consolidation allows you to restructure debt payments so you can pay back what you owe in a more efficient way. You reduce the interest rate applied to your debt to minimize total interest charges. As a result, more of each payment you make goes to eliminate the actual debt instead of accrued interest charges. You can get out of debt faster even though you may pay less each month.

If you have a good credit score and a reasonable amount of debt to repay (usually less than $5,000), then look into do-it-yourself debt consolidation. If you have less than perfect credit or more debt, you may need help. In this case, contact a credit counseling agency to see if you qualify for a debt management program.

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Research of the Week: How America Prefers to Make Payments

We use debit more often, but credit covers higher costs.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

The Federal Reserve released their Payments Study for 2016. This explores how Americans prefer to make payments. It looks at both the total number of transactions made and the dollar value of those purchases.

The big result

Of all payment methods, debit cards have the highest usage. Americans used debit cards to make 69.5 billion payments in 2015. Americans only used credit cards to make 33.8 billion payments in the same year.

However, the total value of debit transactions only added up to $2.56 trillion. Credit cards totaled up to $3.16 trillion. So while credit cards were used less, they paid for more.

The fascinating details

Interestingly enough, both of payment methods were beat in total value by ACH payments. ACH refers to automatic transfers that you set up directly from your bank account. This is how many Americans prefer to pay bills, which may explain why ACH accounts for $90.54 trillion spent in 2015. However, the number of transactions was low – only 9.9 billion payments were made using ACH.

As a result, the number of payments versus the total value generates 2 pyramids that are almost the inverse of each other:

Another interesting part of the study compares how Americans preferred to make payments in 2015 versus three years prior in 2012.

As you can see from the numbers, overall Americans are much more active about payments in 2015. The only category that lost ground was payments made by check. As debit and credit cards become more convenient, checks are slowly becoming less relevant.

What you can do

“New payment methods definitely make life more convenient, but they can also make it more difficult to keep your accounts out of the red,” explains April Lewis-Parks, Director of Financial Education for Consolidated Credit. “This means household budgeters need to pay closer attention to daily account activity.”

That extra attention can help you keep checking in good standing so you can avoid hassles, such as overdraft fees. According to Statistics Brain, roughly one in five Americans (18%) had at least one overdraft last year. Low-income households are more likely to overdraft; roughly 64% of Americans who make less than $30,000 per year had at least one overdraft.

“Know when automatic payments will be deducted,” Lewis-Parks encourages, “and check your accounts before that date to ensure you have sufficient funds. If your bank or credit union has a mobile app, sign up! This allows you to check account balances daily to ensure you can make payments and process transactions without an issue.”

The more you check account balances and take time to track payments and plan ahead for ACH, the less likely you are to overdraft. Of course, the other part to ensuring you keep up with payments you make is to ensure you’re managing the credit card debt effectively.

“Increasing use of credit cards is fine as long as you have the means to manage the debt effectively,” Lewis-Parks continues. “If you’re using credit cards strategically to make purchases within your budget, simply ensure you have the means pay your bills in-full each month. Doing so minimizes interest charges and makes credit use more effective.”

And remember, if credit card payments become too much for your budget, Consolidated Credit will be here to help. Call [PHONE_NUMBER] or complete an online application to request a free debt and budget evaluation from a certified credit counselor. Together you can make a plan that balances your budget so you can get ahead of your debt.

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Research of the Week: Will You Live to Be Debt Free?

More Americans are feeling optimistic when it comes to debt elimination.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

CreditCards.com recently released their 3^rd annual survey about financial optimism. Each year, the company completes a telephone survey of 1,000 adult consumers in the U.S. to see if they’re feeling optimistic about their chances of being completely free of debt.

The big result

Americans are fairly optimistic in 2017 about debt elimination. Only 12% of indebted consumers believe they will never pay off what they owe. That’s a distinct reduction from last year when 21% of everyone surveyed gave that same response.

The fascinating details

In spite of reports that Americans are reaching critical levels of debt, those polled by CreditCards.com seem to share a distinctly positive outlook.

• Almost one in four (24%) said they’re debt-free right now
  • That number was only 22% last year
  • In 2014 in was 14%
• Most people believe they will be debt free by age 53
  • Most Millennials (60%) think they can achieve freedom by 30
  • Gen X is less optimistic, with more saying they’ll achieve freedom after 60 or never at all
• Once they’re free of debt…
  • 72% would save or invest
  • Only 6% would splurge on a big ticket item
  • 32% would specifically save for retirement

What you can do

One part of those results that concerns April Lewis-Parks, Director of Education for Consolidated Credit is that consumers seem to treat debt elimination and savings as a tradeoff.

“Waiting until you’re debt free to start saving is usually a good way to ensure you never end up saving anything at all,” Lewis-Parks explains. “Households often make the mistake of focusing too much on one aspect of finance instead of striking a balance. Savings can’t wait on freedom from debt.”

Creating balance is part of what Consolidated Credit’s counselors help clients to do as they work their way out of debt. When clients enroll in a debt management program, they work with the counseling team to create a balanced budget. This includes setting aside 5-10% of your household income for savings. That occurs simultaneously as those clients pay off their debt through the debt management program.

“If you’re wholly focused on debt elimination and you’re not saving anything, you essentially set yourself up for failure,” Lewis-Parks explains. “One emergency expense can put you in a hole with debt again because you don’t have savings to cover it. That’s why you need a financial strategy that balances both.”

If you’re working to eliminate debt, but you’re worried that savings is falling through the cracks, we can help. In the right circumstances, a debt management program can reduce your total monthly payments by 30 to 50 percent. That frees up more money that can be used to balance your budget and save. Call Consolidated Credit today at [PHONE_NUMBER] or complete an online application to request a free debt and budget analysis from a certified credit counselor.

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Research of the Week: Do You Live Where It’s Easy to Repay Debt?

Where you live can have a major impact on how easy it is to get out of debt.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

The financial experts at SmartAsset have released their second annual study on the Best Cities to Get out of Credit Card Debt. The idea is that where you live can have a significant impact on your ability to get out of debt. It’s based on factors, like:

• How much the average resident earns
• The average cost for housing in that area
• The cost of living in that area
• Taxes

If you live where income levels are high relative to total cost of living, then it’s easier to eliminate debt. You should have more cash flow available to pay more than the minimum payment requirements on your credit cards. As a result, it’s easier to pay off your debt quickly and minimize interest charges.

The big result

The cities where it’s the easiest are highly specific and not isolated in one particular region of the country. In other words, just 50 miles difference in where you live can significantly affect how easy it is to eliminate debt.

The fascinating details

Let’s take Smart Asset’s Number One Easiest City to Get Out of Debt: Anchorage, Alaska:

• In this study, Anchorage is at the top largely because residents have a robust average salary. Median income is $78,662 in Anchorage
  • That’s notably higher than $69,629 average annual income nationwide reported by the Bureau of Labor Statistics
  • Even residents with only a high school diploma earn $37,422 average annually
  • So as a result, residents who focus can pay off their average credit card balance of $5,323 within about 6 months
• HOWEVER…
  • That ease of debt repayment doesn’t carry over to other parts of Alaska.
  • As a result, the state as a whole sits at Number One on the list of states with the highest debt burdens, sharing the spot with New Mexico
  • Alaskan borrowers as a whole also have higher rates of default, so they have more debts in collections, along with higher student debt burdens

The same logic can be applied to the Number 3 spot on this list, Bakersfield, California. While it may be easy to repay debt in Bakersfield, the rest of California’s residents are not as lucky. Residents in San Diego, Los Angeles and Long Beach are reportedly being priced out of homeownership. Housing costs are so high that residents have limited resources for everything else in their budget. In San Francisco, rental costs rose by almost 15% in one year. It’s one of the least affordable places to live in the country now.

What you can do

“Moving to make it easier to repay debt as a short-term strategy doesn’t make much sense,” says Maria Gaitan, Housing Director of Consolidated Credit. “However, you should carefully consider things like cost of living and affordability as you plan for the long-term. As you sign your next rental agreement or apply for a mortgage, cost of living concerns need to be a big part of that discussion.”

Gaitan encourages people to reach out to speak with a HUD-certified housing counselor. Counselors may be able to help you identify ways overcome cost of living challenges. This is especially true if you live in an area which high median mortgage and rent levels.

“These days, housing costs and cost of living can vary greatly, not just by state or by county, but even by municipality,” Gaitan explains. “Moving 30 minutes away may increase your commute time, but it may also make it easier for you to manage your finances in the long-term.”

Gaitan also explains that certain municipalities can be more favorable for first-time homebuyers. They may offer homebuyer assistance programs that can help reduce housing costs so you have more money available for things like debt elimination.

“The way money is divided at the federal, state and even local municipal levels is very specific,” Gaitan says. “As a result, it’s in your best interest to talk to a housing counselor who is familiar with all of the assistance options available in your area.”

If you’re thinking about buying a home or making a move this year and you need some help, call Consolidated Credit at 1-800-435-2261. Our HUD-approved housing counselors are trained to help Florida homebuyers where we’re based. However, they can also refer you to other HUD-approved agencies where you live.

The post Do You Live Where It’s Easy to Repay Debt? appeared first on Consolidated Credit US.

Research of the Week: Seniors’ Student Debt Burden

Seniors’ student debt total has more than doubled in the past decade.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

The Federal Reserve of New York released a new report last month on the burden that older Americans face from student loan debt. The report finds that increasingly, seniors face a much tougher battle with debt than they did twelve years ago.

The big result

Overall, the debt burdens of borrowers age 50 to 80 increased by over 60 percent in the past 12 years. A big part of that increase stems from student loan debt, where the average borrower’s balance has more than doubled.

The fascinating details

The report finds that the average levels for most types of debt are fairly constant. Seniors have the same levels of mortgage debt, home equity lines of credit, auto loan debt and credit card debt. However, student debt saw a serious uptick. And this increase in overall indebtedness is risky for a population that largely lives on a limited fixed income.

So why are seniors so overburdened by student loan debt? A Government Accountability Office report released in 2014 provides some insight:

• Only 27% of the student loan balances held by borrowers age 50 to 64 are for children
  • In other words, 73% borrow to fund their own education
• For borrowers 65 to 74, 82% funded their own education and 83% of borrowers over age 75 did the same

In the past people speculated that seniors faced increased student debt because of PLUS loans taken out for their children. However, this shows most of the debt results from personal education instead.

What’s more, seniors have higher levels of default on student loans:

• Borrowers age 25-49 default at a rate of 12%
• By contrast, borrowers age 65-74 default at a rate of 27%
• Even worse, over half of borrowers over the age of 75 defaulted on their student loans

It’s not surprising that garnishment from Social Security checks has increased by more than six times in the past 10 years. Federal law protects seniors by guaranteeing they receive at least $750 per month from Social Security checks. But that’s not enough to live on in most places these days.

What you can do

“A fixed income in retirement is not meant to support significant debt elimination,” argues Gary Herman, President of Consolidated Credit. “That’s why, traditionally, experts recommend that consumers should eliminate as much debt as possible prior to retirement. Even minimizing mortgage debt is helpful because fixed income is not designed to carry a high debt burden. That’s particularly true if you rely on Social Security as your primary source of income.”

This means if you’re nearing retirement and thinking of going back to school, consider how to fund those continuing education costs carefully. Student loan debt cannot be discharged by bankruptcy, so you can’t just default and declare bankruptcy to get around repayment. If you incur the debt, it’s going to follow you until you pay it back.

With that in mind, make sure to explore all of your options. Look into local community colleges and search online to explore grants and scholarships specifically targeted to your age group. This will help minimize the cost of going back to school so you can expand your mind without increasing your debt burden.

Of course, that advice only helps those who haven’t yet slipped in to the student debt trap. What about seniors who already face an uphill battle to repay their student loans?

“If you took out federal loans, whether they’re subsidized or unsubsidized, you can apply for a hardship-based repayment plan,” Herman explains. “These programs set monthly payments based on what you can afford. That makes it easier to repay what you owe on a fixed income.”

An income-based repayment plan rolls all eligible loans into a single monthly payment. The specific amount you pay is based on your Adjusted Gross Income (AGI) and family size. In most cases, it equals out to roughly 15% of your income. If you took out your loans recently – i.e. after 2011 – then you may qualify for the Pay as You Earn program. This drops the monthly payment amount even lower, usually around 10% or less.

For more information on student loan repayment plans, visit Consolidated Credit’s free guide to Student Debt Repayment.

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Research of the Week: On Par with Average Credit Card APR

Are your credit card interest rates on par with national averages?

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

CreditCards.com publishes a Credit Card Rate Report each week. The most recent report is notable because the average interest rate on new credit card offers remains at record highs.

The big result

The national average APR now sits at 15.42 percent. That’s a quarter of a percentage higher than it was just six months ago when rates hit a record high at 15.18 percent.

The fascinating details

CreditCards.com determines average credit card APR by looking at rate offers on the 100 most popular cards from major issuers. They also break rates down by the type of credit card:

The rates listed are all for APR on standard purchases. So they don’t factor in any introductory periods where APR may be lower. For example, most balance transfer credit cards offer 0% APR for anywhere from 6-24 months. The 14.67 percent rate is what gets applied once the introductory period ends.

What you can do

“Although these new national averages are record highs, often cardholders will find their own rates may be even higher. Looking at national average rates offered on new cards can help cardholders assess their current rates,” explains Gary Herman, President of Consolidated Credit. “If you have a good credit score and a solid credit history with a particular creditor, then it may be time to call them to ask for a rate reduction.”

Herman advises credit card users to take some time to evaluate the rates on each of their credit cards. If the rates are higher than the average listed above, it’s time to call your creditors to negotiate. These tips can help you secure the rate reductions you need:

1. Know where your credit stands – if your score is high and your credit report is free of negative items, then you’re in a good position to negotiate
2. Get the facts about your account before you call – know how long you’ve been a customer and how long you’ve paid on time without any late or missed payments
3. Now call to speak with customer service – after you make the initial request, they may pass you up the chain to someone who’s authorized to negotiate with you

For more tips to help you negotiate effectively with your creditors, visit Consolidated Credit’s guide to Credit Card Negotiation Strategies.  And remember, if you can’t negotiate lower rates on your own, we can help. Call Consolidated Credit today at [PHONE_NUMBER] or complete an online application to request a free debt analysis from a certified credit counselor.

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Research of the Week: Feeling Debt Shy?

A new study finds 80% of borrowers worry about their current debt levels.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

Recently a leading financial research institute named Filene asked more than 1,100 Americans how they feel about debt. They wanted to see how everyday borrowers felt now that we’re seven years out of the Great Recession.

The big result

More than half of those surveyed report that plan to avoid debt this year unless it’s completely necessary. That makes sense, given that 80% of respondent said they have serious concerns about their current debt levels.

The fascinating details

And while 80% of respondent worry about current debt levels, 93% are resistant to taking on more debt:

• 41% would not feel confident taking on more debt within the next 6 months
• 51% will only take on more debt if a specific need arises
• Only 7% feel confident about taking on more debt

According to the survey results, consumers are most stressed about:

1. Credit card debt
2. Student loans
3. Medical bills

They’re least stressed about:

1. Mortgage debt
2. Entertainment costs
3. Auto loan debt

What’s more, 12% of respondents say debt has become a major source of stress in the household. They also have key concerns about why taking on more debt is risky:

1. 49% say they lack the earning power necessary to manage debt
2. 36% have concerns about how they would maintain good credit
3. 35% report poor economic conditions make them nervous

What you can do

“If you’re concerned about debt, there are really two steps you need to take,” says Gary Herman, President of Consolidated Credit. “Avoiding new debt is only one of those steps. At the same time, you need an aggressive strategy to eliminate the debt you already carry.”

Herman encourages distressed borrowers to reach out for free credit counseling. This allows you to see where you stand and learn about options for relief.

“In many cases people are in a situation where high debt levels drain income,” Herman explains. “This makes budgeting difficult, which leads to more debt. You use credit cards to cover shortfalls and emergencies. Even though you don’t want to take on more debt, you charge because it seems like the only option available when the need arises.”

What credit counseling can help you do:

1. See where you stand with your current debt load
2. Identify options that allow you to get out of debt faster
3. Restructure your budget so you can really afford to live without any reliance on credit

For more information, call Consolidated Credit today at [PHONE_NUMBER] or complete an online application to request a free debt and budget analysis from a certified credit counselor.

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Research of the Week: Does Your Debt Scare You?

A new survey finds 65% of people have a fear of debt.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

The financing experts at Affirm – a lender that offers alternative financing options for people with less than perfect credit – recently released a survey of over 1,000 adults age 22-44. The goal was to determine how consumers really feel about their debt.

The big result

People are afraid of debt – nearly 2/3 of survey takers reported they have a fear of debt. However, it’s not exactly the debt that people fear; it’s the uncertainty that comes with it.

The fascinating details

If people truly feared debt, they’d stay away from it completely. But that’s not what Affirm’s results show:

• 86% of respondents have at least one credit card; 31% have three or more cards
• 57% of people who carry a balance over on at least one credit card have a balance of $1,000 or more
• 48% of those borrowers say it will take more than 6 months to pay off what they owe
• 93% of respondents have a weekly or monthly spending plan; only 5% don’t budget at all
• 49% of those who carry a balance say it was generated by an emergency or unexpected cost
• 46% say they enjoyed the purchase less because of the lingering debt

The survey also found 68% they would prefer simple, fixed payments instead of a revolving debt repayment scheduled. That may explain why 86% would opt for a simpler repayment system versus a credit card.

What you can do

“You don’t have to use credit cards to fund major purchases,” explains Gary Herman, President of Consolidated Credit. “And you should consider all of your financing options before you make any key decision.”

Herman argues that if you have a balanced budget so you don’t have to use credit to cover daily expenses, then you should have savings available. You can save up in advance and pay for the purchase in cash rather than paying off the debt once it’s incurred.

“Either way, you’re going to pay,” Herman argues. “It’s just a matter of when and at what cost. Saving up ahead of time takes diligence. But if you incur a debt to pay for an item, the cost is monetary – you add to the cost of your purchase with interest charges.”

Herman also argues that people often turn to credit when they should be looking to loans. Things like home renovation costs and car repairs may be funded in a more manageable way with a loan.

“If you can get a loan for $10,000 to cover the cost of a home remodeling job instead of putting all that debt on a high interest rate credit card, it may be better for your finances overall” Herman says. “The loan will generally be financed at a rate of less than 10% while a credit card may be upwards of 20%. Your total cost will be lower overall. So it’s worth it to take out the loan to cover such an expensive project.”

Herman advises borrowers to look into the following when considering any loan:

1. Can you afford the monthly payments?
2. What will be the total interest charges and the total cost of the loan?
3. How long will it take to pay off the debt?
4. Are there any penalties for early repayment?

For more information about managing your debt and effective methods of debt repayment, call Consolidated Credit today at [PHONE_NUMBER]. You can also complete an online application to request a confidential debt analysis from a certified credit counselor at no charge.

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Research of the Week: Save Your Refund for Better Things

Record numbers of Americans plan to save their tax refund this year.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

For the past 10 years, the National Retail Federation has conducted a survey of American consumers about tax returns. NRF’s goal is to find out how consumers plan to use their tax refunds each year.

The big result

“A record low number of Americas will spend their tax returns this year while he second highest number on record will put the money into savings.”

Essentially, the survey finds that most Americans plan on squirrelling that money away for a rainy day. And those who will spend their refund this year plan on using it to pay off debt. Apparently, gone are the days that most people used their refund to splurge.

The fascinating details

Of those surveyed, roughly 66% said they expected to receive a tax refund this year. Over half of people surveyed planned to have their filing completed by the end of February. And two thirds of people now plan to file electronically.

The uses for refunds are almost wholly focused on promoting financial stability:

• 48% plan to put the money in savings
• 5% will pay down debt
• 9% will use the money to help cover everyday expenses
• 7% will use it to take a vacation that doesn’t rely on credit cards
• 7% will fund a major purchase, like new electronics or a car
• 6% will splurge
• 0% will use it for “other” purposes

What you can do

“It’s encouraging to see so many Americans plan to use their tax refund for practical purposes,” says Gary Herman, President of Consolidated Credit. “Even if you use it for a major purchase or to fund a vacation that’s not splurging. You’re avoiding the debt that you would have taken on otherwise, which means it’s a good move for your finances.”

That may seem counterintuitive, but spending your refund on something nice doesn’t necessarily mean you’re splurging. For instance, if your laptop is dying and you need a new one, that’s a necessary expense for many Americans because they use laptops for work.

“The same is true for a vacation,” Herman explains. “Vacations often seem like luxuries, but most of us really need time off and away from home to unwind. It’s hard to maintain your sanity and keep up a grueling schedule if you never take a break. So even if you use your refund on a vacation, you’re spending the money strategically.”

So what does count as splurging?

“Splurging is when you buy something you don’t need because it makes you feel good, but not because you have a clear need,” Herman says. “So in that sense the same purchase made in different situations may be splurging or it may not be. If you buy a TV because yours broke, it’s not splurging. But if you buy a new TV because it’s larger, it’s a little harder to justify that as a necessary expense.”

Finally, Herman advises debt management program participants that they can use a tax refund to make an extra payment on their program.

“There is no penalty for paying off your debt management program faster than on the assigned payment schedule,” Herman concludes. “So if you don’t have another use for your refund, call the credit counseling team to request an extra payment on your program. We’ll distribute it accordingly to your creditors and you can be out of debt that much sooner.”

To speak with a credit counselor about making an extra debt management program payment with your tax refund, call [PHONE_NUMBER].

The post Save Your Refund appeared first on Consolidated Credit US.

Research of the Week: Credit Card Debt Decreases in January

Are consumers finally starting to see the light about curbing debt levels?

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

The Federal Reverse released its latest consumer debt report on Tuesday.

The big result

Total consumer credit card debt in the U.S. decreased by $3.8 billion in January. It’s the first time credit card debt has decreased since February of last year. It’s also the single biggest decline in consumer credit card debt since October 2010.

The fascinating details

Total borrowing actually rose by $8.8 billion in January. But that’s the smallest monthly gain since July 2012. It’s also notably smaller than the $14.8 billion increase in December of last year.

What drove that increase?

• Auto loans and student loan borrowing increased by $12.6 billion in January.
  • Debt in these categories along with credit cards is now up to $3.77 trillion – a record high.
• Total household debt not including mortgages rose to $12.58 trillion at the end of last year.
  • We’re only about $100 billion below the all-time high set in 2008 (i.e. just prior to the crisis)

So auto loan debt and student loan debt both saw increases in the first month of this year. Experts are already warning auto loans are at high risk for delinquencies along with credit cards.

What you can do

“Debt levels for most households are getting dangerously high,” explains April Lewis-Parks, Education Director for Consolidated Credit. “Average credit card debt per household is now up to $8,377. At this point, slowing down isn’t enough. Americans need to stop spending and start eliminating their debt.”

Lewis-Parks warns that families are leaving themselves open to the same risks we saw just prior to the recession in 2008. When the real estate market collapsed and the economy to the most severe downturn since the 1930’s, people were forced to make some tough choices. Acting now before a crisis can make those choices easier.

“You don’t want to wait for the economy to take a turn again before you take control of your finances,” Lewis-Parks encourages. “Starting working to find a solution that will eliminate your debt now so you can start saving. That way, even if the economy takes another turn, you won’t be left in a tailspin, wondering how you’re going to make ends meet.”

If you owe more than $5,000 in credit card debt, start exploring options for debt consolidation. For a free debt evaluation from a certified credit counselor, call Consolidated Credit today at [PHONE_NUMBER]. You can also request help now through our online application.

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