Credit card debt plagues tenants as eviction moratorium expires

While total credit card balances have declined significantly during the COVID-19 pandemic, this overall improvement masks some significant challenges at the household level. Many tenants are caught in the crosshairs, and the situation could worsen as a result of the Supreme Court decision of August 26 which struck down the CDC’s moratorium on evictions.

Money Management International (MMI), the country’s largest nonprofit credit counseling agency, reports that about half of its recent counseling sessions have focused on housing issues, up from about one in four before the pandemic. . Tenants who turned to MMI for help in 2021 have accumulated an average of nearly $ 25,000 in credit card debtsaid Michelle Jones, the agency’s chief external affairs officer. In 2019, the average was around $ 3,000. This indicates that many have racked up substantial living expenses on their credit cards because they fell behind on their housing bills.

For context, the national average credit card balance is $ 5,313. according to Experian. Just over half of active credit cardholders carry month-to-month balances, the American Bankers Association said. And it is a very expensive debt; Bankrate sets the average credit card interest rate at 16.21%.

Multiple crises collide

Some 11.4 million American adults were behind on rent payments in late June and early July, a Center on Budget and Policy Priorities investigation revealed.

The pandemic is making a comeback, fueled by the Delta variant. The seven-day moving average of new COVID cases in the United States was 153,245 on September 1. as measured by the CDC. This was well above the seven-day moving average (88,047) recorded exactly one month earlier.

While total credit card balances were 15% lower in the second quarter of 2021 compared to the fourth quarter of 2019, according to the New York Federal, MMI’s experiences show how this improvement was not shared equally by all Americans.

A deeper dive into this Bureau of Labor Statistics data reveals a similar trend: general improvements mask the fact that not everyone is doing betternot by far.

The unemployment rate peaked at 14.7% in April 2020 and fell to 5.4% in July 2021. Although this is substantial progress, the unemployment rate is still higher today than it was before the pandemic. In February 2020, unemployment was only 3.5%. This means that the number of unemployed Americans fell from 5.7 million in February 2020 to 8.7 million in July 2021, and that doesn’t even include those who have stopped looking for work for various reasons.

The labor force participation rate, which includes workers and those actively seeking employment, declined 1.6 percentage points during the pandemic.

What to do if you are having trouble

While Congress has designated more than $ 45 billion in rental assistance in late 2020 and early 2021, the rollout has been bumpy and most of that money has not been spent. The Consumer Financial Protection Bureau has a useful list of rental assistance programs available to tenants and landlords. Certified housing advisers such as Money Management International can also help. The end of the moratorium on CDC evictions should make the distribution of this aid even more urgent. (By the way, some cities and states still have moratoriums on evictions, so find out about policies in your area.)

If you have good credit but have accumulated debt, consider getting a 0% balance transfer credit card. Suspending the interest clock for up to 20 months can save you a lot of money. Just make sure you are making progressyou shouldn’t see this as a shell game of moving debt from one card to another, and ending up where you started. Finding ways to increase your income or reduce your expenses can boost your debt repayment strategy.

For those with lesser credit, or even if your credit score is strong but you need a little extra nudge in the right direction, reputable nonprofit credit counseling agencies such as MMI can be extremely helpful. In addition to providing great advice tailored to your individual situation, they can negotiate lower rates with your creditors and consolidate your monthly bills into one payment you can afford. A common scenario is something like a four year payback with a 7% interest rate. These numbers are similar to the personal loan terms available to people with good credit, but accessible to a much wider audience.

Finally, while the window to appeal for goodwill may have expiredif you are late on your bills, you can only buy a limited time from a landlord, credit card issuer or other creditorI still think communication is a good idea. Don’t ignore the problem. At the very least, acknowledge that you are late and come up with a solution. Consider asking for more time to pay them off, a lower interest rate, or another break.

If nothing else, keep the lines of communication open. Hiding is not the answer. Face issues head-on before you get sued or find yourself in a corner where bankruptcy and eviction are your only answers. Getting out of debt is not easy, but it is possible. Don’t be afraid to ask for help along the way.

A question about credit cards? Email me at [email protected] and I would be happy to help.


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3 ways too much credit card debt can hurt your finances

Some people find themselves in credit card debt when too many surprise bills hit. Other times, credit card debt is something that slowly but steadily accumulates over time, to the point where it becomes less and less manageable.

As a rule of thumb, it’s best not to run into credit card debt at all. The more you accumulate, the more money you will lose in interest charges.

But that’s not the only problem with credit card debt. Here are some reasons why too high a balance could hurt you financially.

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1. This can leave you with a higher mortgage rate

The more credit card debt you have, the higher your credit utilization rate is likely to be. It is the ratio that measures your existing revolving debt against your total credit limit. Once this ratio exceeds the 30% threshold, it can lead to damage to the credit score. For example, if you have a total credit limit of $ 10,000 and you owe more than $ 3,000, you risk negative consequences. This, in turn, can make borrowing more expensive.

If you’re looking to buy a home, having too much credit card debt could leave you with a lower credit score – and end up with a higher mortgage rate. Plus, if you have too much debt that you monopolize too much of your income, a mortgage lender may turn you down completely.

2. It can make a personal loan more expensive

Just as you might end up with a lower interest rate on a mortgage when your debt load is huge, the same could happen with a personal loan. In fact, since personal loans are unsecured, meaning that they are not backed by a specific asset, lenders rely heavily on the credit scores of borrowers to determine rates. interest to be granted. But if a huge pile of debt lowers your score, it could mean paying a lot more to borrow.

3. It can cause you to lose lucrative credit card offers

There are many credit cards that offer attractive rewards programs and signup bonuses. These can put extra money in your pocket, but if your high level of credit card debt lowers your credit rating, you might not be eligible for these offers. If anything, you’re more likely to end up with a credit card that offers less rewards and charges a higher interest rate on new balances.

No longer have debts

If you’ve somehow climbed a huge pile of credit card debt, don’t despair. Instead, try to reduce that balance as quickly as possible.

Set a budget so that you can carefully track your spending, and cut as much spending as possible to free up money to pay off your debt. You might also consider finding a side job to raise extra money that can be used to pay off your debt.

At the same time, check to see if you qualify for a balance transfer, which will allow you to transfer your existing credit card balances to a new card with a lower interest rate. This, in turn, will make that debt easier and less expensive to eliminate. And the sooner you do it, the less your personal finances will be affected.


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