American consumers have rebuilt the nation’s credit card debt to record levels and in the process rekindled the debate about whether debt management or a debt consolidation loan is the better solution for dealing with that problem.
Add the fact that households carrying a balance from month-to-month typically pay 20-36% interest rates on credit cards and owe an average of $8,509 and it’s not hard to figure why millions of American consumers are a missed payment or two away from a financial crisis.
If you have to pay 25% interest on a credit card balance of $8,509, your interest payment alone for one month would be $177!
The COVID-19 pandemic kept many consumers at home the first half of 2020 so total credit card debt actually dropped below $1 trillion for the first time since May of 2011. According to the Federal Reserve Bank of New York, credit card debt nationwide stood at $890 billion at the end of Q1 in 2020.
Where do you turn for help when your credit card debt – or any other form of unsecured debt – gets that far out of hand?
The best option is debt management through a nonprofit credit counseling agency, but that is hardly the only choice. Debt consolidation loans, debt settlement and even bankruptcy, if the financial problem has gotten completely out of control, are other options.
Choosing a Debt Relief Option
There are several options for credit card debt relief, but the choice often comes down to debt management vs debt consolidation. Both are practical and proven ways to get out from under the burden of too much debt, though they rely on very different methods. The one similarity between the two programs is that each requires the consumer to make a monthly payment, but that is where the similarities end.