Q: HELP! I have one credit card, and they have raised the interest rate. It went from 12.9% to 30%, and now they are turning it over to a collection department. I am living paycheck to paycheck and sometimes not making it then. What can I do? I am married and my husband is only working one job. When I try to suggest something, I get no response. I am trying to find something, but no success so far. I also have an 8-month-old to think about. Can you help me?
A: If misery loves company, then you should take heart in knowing you are not alone. Late payments on credit cards reached record levels and defaults rose sharply as consumers struggled to pay their bills in a “deteriorating economic environment,” according to the latest Credit Card Index results from Fitch Ratings.
Credit card debt delinquent at least 60 days reached 3.75% in December 2008, up from a high of 3.73% recorded in February 1998, according to Fitch Ratings.
In December bank credit card charge-offs increased to 7.5%, the highest level since 2005. Fitch anticipates charge-offs will reach 8% in the coming months and go as high as 9% during second half of 2009.
Part of the reason there are more people falling behind is illustrated in your case. You get in trouble and the credit card company raises your interest rate, which makes your minimum monthly payments higher, which in turn makes it even more difficult for you to pay your bill.
Somehow the companies don’t seem to get that if you beat a dead horse, he doesn’t jump up and come alive. He’s just stays dead.
But here you are in a pickle. First, I don’t want you to beat up on your husband. I mean the man has a job. These days, that’s saying something. You shouldn’t nag him about not having a “second” job. Now that’s not to say you two shouldn’t be looking for ways to bring in additional income. However, the tendency is for couples to lash out at each other when things get tight. Don’t do that. You are in this together with a baby. And I suspect he didn’t run those credit card bills up all by himself.
Second, do whatever you can to cut back on your expenses. I mean cut everything, including cable, your cell phone bills, etc. Everything has to be on the chopping block so that you can eek out whatever savings you can to pay down your credit card bill.
Also, I certainly hope you are not using this one card anymore. Cut up the card. Freeze it or whatever it takes to make it harder for you to use it. But you can’t use it anymore.
You are on the right track as far as trying to increase your income. The way to get out of debt is to cut back on expenses or get another job or both.
In your note there was no indication that you’ve tried to call the credit card company to negotiate down that 30% interest rate. If you haven’t called, call today! The companies are dealing with a lot of people in debt, so they know the drill. If you get nowhere with the first person you get, ask to speak to a supervisor. Keep asking up the corporate chain until you get somebody who will help you. In addition to asking that the interest rate be dropped, ask for a payment plan to help take some of the pressure off. Only promise to pay what you realistically can afford.
If you are not getting any help with the company, go to DebtAdvice.org. There, you can find a non-profit credit counseling agency near you that may help in negotiating with your creditor to come up with a payment plan you can afford. When you contact the agency, get an appointment for you and your husband to sit down with someone who can help you budget better going forward.
I want to say one more thing to you. You should do everything in your power to honor your word and pay back this debt. However, you should take care of your necessities first—food, housing, utilities, etc. This debt can wait. And do not let it take your marriage down. That baby needs a mommy and a daddy working together to get out of this mess.