Experts provide advice as credit card delinquencies increase

Financial Wellness and Credit Card Delinquency: A Growing Concern for Younger Consumers

The Federal Reserve Bank of New York has reported that seriously overdue credit card debt has reached its highest level in over a decade, with 10.7% of credit card debt being severely delinquent during the first quarter of 2024. This increase from 8.2% a year ago is particularly affecting individuals aged 35 and under, who are struggling more than other age groups to pay their bills.

Financial experts are urging those at risk of delinquency to seek help from nonprofit credit counselors as soon as possible. These counselors can provide free consultations and assist in creating debt management plans with lower interest rates and a single monthly payment. It is important for borrowers to be cautious of scammers and for-profit debt consolidation companies, as nonprofit organizations typically offer more affordable solutions.

Martin Lynch, president of the Financial Counseling Association of America, emphasized the importance of being open and honest with counselors about financial circumstances. He encouraged borrowers to contact credit card companies directly to negotiate interest rates, fees, and long-term payment plans, as many companies have hardship programs available for those facing financial difficulties.

The current economic climate, with high inflation rates and the end of pandemic-era aid programs, has put additional strain on consumers, especially younger and less affluent individuals. Silvio Tavares, CEO of VantageScore, advised borrowers to be aware of their credit score and avoid over-extending themselves with high-interest loans.

While credit card debt only makes up a small percentage of consumer debt, the increase in delinquencies is outpacing income growth, according to a Bank of America Global Research report. Bruce McClary, senior vice president at the National Foundation for Credit Counseling, warned that a worsening economy could push more consumers into severe delinquency if they are unable to pay their balances in full.

Overall, experts are urging individuals facing financial challenges to seek help and explore options for managing their debt to avoid falling further behind. By taking proactive steps and being transparent about their financial situation, borrowers can work towards financial stability and avoid the negative consequences of severe delinquency.

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