Two in five Americans have maxed out their credit cards.
Low savings — coupled with inflation and higher prices — have created big gaps in household budgets, causing many to reach for their plastic.
Channel 11 spoke with a woman who was one day away from bankruptcy and learned how she got some help.
Connellsville native Susan Flesik tells us that more than a decade ago, she let her brother John talk her into a bold business move.
“‘Let’s buy the old Crawford school on Seventh Street and put a haunted house there,’” she recalled him saying.
But, the 100-year-old building needed a ton of work.
“And utilities on a building the size are just astronomical,” Flesik said. “It’s a lot. And it became overwhelming. It was completely overwhelming.”
Then in 2015, Flesik’s brother was diagnosed with Alzheimer’s disease, leaving her to run a coffee shop and the haunted house. At that point, she and her husband were putting unplanned expenses on credit cards.
“We had four and they were pretty much all practically maxed out. The total was around $22,000. I was 42 at the time and I was told that it would be about 30 years. I would be 72 years old when I paid those off. $22,000,” she said.
Non-profit Money Management International says they’ve seen a 42% increase in the number of people coming to them for credit counseling services this year. Inflation has left many without enough money to cover bills, things like groceries and fuel.
“Our average client is now short about $300 a month in their monthly budget,” Thomas Nitzsche said. “There’s a lot of studies that show that most Americans don’t have a lot of emergency savings in place. And so when you don’t have that to fall back on, a lot of times you turn to credit cards.”
Nitzsche advises consumers to go to their credit card companies and negotiate a lower interest rate.
“Three in four people who asked their creditor for a lower interest rate got it. And that on average, it was about a 6% point reduction. So that can really help a lot if you’re able to get that interest rate reduced even a little bit so that more of your payments going to principal rather than interest,” he said.
Know that you’ll have to pay more than the minimum to start shaving away at debt.
Flesik enlisted the help of MMI. They worked with her creditors to lower her interest rate and she paid just over $500 a month to debt.
“I couldn’t wait till the day that I could say, this is paid off,” she said.
That day came las fall, after five years, Flesik and her husband had nothing left on the cards. She still uses them for some purchases, but she’s careful with her spending.
“I make sure it’s paid off every month before the due date or on the due date. And I’ve been diligent with that,” she said.
Although the initial debt counseling was free, Flesik did pay a monthly fee to MMI for their negotiation services. She says, for her, it was worth it to get the lowest possible interest rate on all four of her credit cards.
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