​America’s skyrocketing credit card debt

The U.S. economy may be strengthening, but by one measure Americans are flunking the basics of personal finance.

Credit card debt is ballooning, leaving American households with a net increase of $57.1 billion in new credit card debt in 2014, according to a new survey from CardHub. The credit card comparison site said it’s forecasting new credit card debt will rise 5 percent in 2015, reaching $60 billion this year.

While the increased spending could signal that Americans are feeling more sanguine about their prospects and the economy, it’s also a cause for concern given that most workers aren’t seeing the type of wage growth that would support that higher spending. The surge has left the average household credit card balance at almost $7,200, or not far from the $8,300 level that CardHub considers unsustainable.

 “We’ve now had six consecutive quarters of year over year increases in our credit card debt load,” CardHub said in the study. “As a result, we must strive to remember the corrosive impact of debt on household finances during the recession and work to get out from under its influence before the burden becomes unbearable again.”

While Americans are carrying more debt, their earnings are barely ahead of where they were a decade ago. Household earnings have increased only 2 percent during the past 10 years, The Pew Charitable Trusts said in a study issued last month.

“That $8,300 figure was the average credit card balance back in the throes of 2008 when the economy started taking the downturn,” said CardHub spokeswoman Jill Gonzalez. “This is a sign that Americans haven’t really learned their lesson. Their attitude toward credit card debt hasn’t improved since the recession.”

On the other hand, Americans are feeling more positive about the economy, which is also reflected in their credit card debt, she added. The company expects 2015 to be a record year for auto sales, as Americans shop for new vehicles amid a brighter outlook, Gonzalez said.

More than half of Americans say they’re financially insecure, citing concerns ranging from student loans and credit card debt to a lack of income, Pew found. With more than half saying they aren’t prepared for a financial emergency, American’s rising credit card debt could pose a problem if interest rates rise or the economy falters.

Still, some signs show that Americans are handling their debt levels, thanks to an improving job market. The credit card charge-off rate, or the percentage of debt that’s declared unrecoverable by credit card companies, is about 2.89 percent, the lowest since 1985, CardHub said.

“While this speaks volumes about the strength of the economy, indicating that more people have jobs and are able to stay current on their financial obligations, the prodigious amount of debt that we continue to rack up indicates that consumer attitudes toward money have not improved since the Great Recession,” the study noted.

Indeed, credit card debt has surged in the last two years, CardHub found. Last year’s $57.1 billion in new card debt is a jump of 47 percent compared with 2013 and a 55 percent leap from 2012.

Aimee Picchi, CBS Moneywatch

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How to have a baby without having a financial crisis

Last year, the cost of raising a child to age 18 for middle-income families rose to $245,000 – and that is not including college. Many of those expenses – about $20,000 of them – could come in the first year when parents factor in child care, medical expenses, and baby equipment. Of course, the value of having a family cannot be counted in dollars alone. But smart would-be parents will recognize that a child comes with a serious punch to the pocketbook, and prepare accordingly.

1. Create a new budget. 

Write down your current income and expenses, using pencil and paper, a spreadsheet or a budgeting app. Next, factor in new expenses that come with having a baby — things like diapers, formula, baby gear and daycare. Daycare center care for an infant costs, on average, $972 a month, but decreases as the child gets older.

2. Save as much as possible. 

Aim to save enough money to cover six-nine months of living expenses in an emergency fund before the arrival of your little one. The goal is to have enough set aside to pay the necessities including mortgage, utilities and groceries if you or your partner were to become ill, injured or unemployed. Keep adding to your emergency fund on a regular basis.

3. Plan how to care for your new addition. 

The Family Medical Leave Act allows most parents to take off 12 weeks from work during the first year after a birth or adoption. But only 11 percent of employees have access to paid leave. Find out what sort of parental leave coverage you and your partner have, if any. Then determine how much time you can afford to take off. You may need to cut expenses and save money now so that you can afford to take off additional – or any – time when the baby arrives. Also, consider whether later, if one parent decides to stay home to care for the baby, you can cover expenses. Perhaps your employer will let you switch to a flexible schedule, job-share, telecommute or cut back your hours. Explore your options now.

4. Get covered. 

Health care costs in the United States for pregnancy and childbirth are the highest in the world, although health insurance can help minimize those costs. You can apply for coverage even while you are pregnant. Most health insurance plans are required to cover maternity care and care for the child. Be aware, however, that you will likely need to pay medical fees up to your deductible. Your insurer, your physician or your hospital can help you estimate charges for labor and delivery. If you have a flexible spending account for health care and/or child care, you may want to increase the amount you save. Now is also a good time to review life insurance policies, too. Chances are that you will need to add to an existing policy or acquire a new one when you become a parent. Also make sure you have (or apply for) disability coverage. Be sure to check whether your plan will cover pregnancy as a disability.

5. Update your paperwork. 

Make plans to update needed documentation, including wills, life insurance and tax documents. If you have savings accounts, education savings plans or trusts, be sure those documents are correct and updated. After your child arrives (by birth or adoption), be sure to obtain a Social Security number for him or her, and verify that he or she is added to your health insurance coverage.

6. Get out of debt now. 

As you can see, expanding your family comes with plenty of expanding costs. If you are struggling with debt, eliminate as much debt as possible before adding to your household. If you are certain that you cannot get out of debt on your own – for instance, you cannot make monthly minimum payments or your total debt is more than your salary – consider contacting a reliable debt relief company for assistance.

All of these expenses can be daunting, but remember that many other parents have successfully afforded a baby. In fact, calling on an experienced parent’s wisdom can help with everything from selecting baby equipment to how to budget and save. Take smart steps to plan, and you won’t be caught off-guard by the costs of a child.

Andrew Houser

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IAPDA Features an Important Company Credential to Aid Consumers with Choosing the Best Debt Relief Company

AccreditedServiceCenter200

IAPDA features the IAPDA Accredited Service Center accreditation. The company of qualified members can display the IAPDA Accredited Service Center logo on their company website and marketing materials confirming their company’s overall level of participation in IAPDA education and certification programs.

Companies of IAPDA members can qualify for this accreditation by committing to IAPDA training and certification of their key staff members. Levels of participation are determined by the number of company employees who complete IAPDA programs and attain certifications, including continuing education and re-certification every two years. Platinum level companies have over 100 currently certified IAPDA members, Gold level companies have 25-99 currently certified IAPDA members, Silver level companies have 10-24 currently certified IAPDA members and Bronze level companies have 2-9 currently certified IAPDA members.

Complete industry education and professional certification is more important than ever in the debt relief industry. IAPDA programs provide a standardized foundation for the debt consultant’s professional knowledge, as well as an objective measure by which consumers can judge the expert they turn to for help.

Laurence Larose, IAPDA Executive Director says, “Consumers deserve to work with debt relief consultants who totally understand all the debt relief options available and who can effectively guide them back to a debt free life.” Leading company owners and top consumer debt experts agree. They heartily recognize and endorse the complete debt relief education and the certifications earned by IAPDA members.

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Consumer Debt Hits an All-Time High

For many American households, the recession was a time to pay off debt and get their finances in order—whether they wanted to or not. But according to the latest data from the Federal Reserve’s Flow of Funds, Americans are taking on debt once again. The difference is that this time we’re borrowing to finance new cars, college tuition, and other consumer goods.

As the figure above shows, American household debt peaked in 2007 and has since fallen 15 percent. Home mortgage debt accounted for much of the decline—it’s dropped 22 percent since 2007. Consumer debt, on the other hand, has continued to increase and just reached an all-time high of $3.2 trillion.

Americans have added about $100 billion of student debt a year to their balance sheets since 2008. Credit cards and auto loans have also come roaring back, particularly auto loans. The amount of outstanding auto debt is the highest it’s ever been.

Auto and credit card debt, while overall much smaller than student or mortgage loans, is in some ways more risky. Student loans and mortgage debt both finance an asset that’s expected to increase in value. A mortgage finances real estate, which has good odds of increasing in value or, at least, holding your housing costs stable for 30 years. Student debt is an investment in future earnings. There’s no guarantee, but the odds are if you finish college, your salary will, over time, recoup your investment. So while the explosion in student debt and the rising delinquency rate are troubling, at least some of the debt can be justified: It’s a leveraged investment that has a decent chance of paying off.

That’s often not the case for auto loans and goods bought with a credit card. A reliable car may be a necessary expense for some, but as an asset it’s guaranteed to depreciate. Beyond safety and reliability, there’s little investment value in buying a new car.

It seems the increase in auto spending was not driven solely by Americans buying the cheapest, safest car they could find. According to the Bureau of Economic Analysis, spending on cars has increased 35 percent since the recession, almost all on new cars. Spending on repairs and net used cars has barely budged. The surge in new-car buying is partially because households that cut back on big-ticket items during the recession are spending again. But the fact that spending seems to be coming at the expense of more debt suggests Americans are putting themselves in a riskier financial position. They may have less debt overall, but an increasing share of that debt finances consumption that only declines in value.

Consumption per capita has been rising since the recession, despite stagnant income. This may revive demand for now, but the financial crisis showed that consumption, financed by debt, is not the path to resilient growth.

By  

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Leading Debt Relief companies now offer compliant, performance based Student Loan Relief.

Student Loan Solutions is an important new resource for all Debt Relief Industry professionals interested in adding this important new profit center to their agency. IAPDA recently completed a thorough study of the very fast growing debt relief vertical Student Loan Consolidation and after months of research IAPDA chooses to partner with the best Student Loan Back-End Processing provider and the best Student Loan Document Processing & CRM Software provider.

http://www.studentloansolutions.iapda.org

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Get That Competitive Edge with the Debt Relief Expo 2014 Virtual Conference and Trade Show

Debt Relief Professionals, looking to gain a competitive edge in today’s market? Want to learn more about current marketing and business practices, industry case studies, compliance legislation and other industry hot topics?

Look no further than your office, home or mobile internet connection thanks to the Debt Relief Expo 2014 Virtual Conference and Trade Show.

Debt Relief Expo 2014 Virtual Conference and Trade Show is offering the debt relief industry’s only virtual conference and trade show so you won’t miss state-of-the-art concepts and latest business insights presented by leading debt relief industry insiders.

See and hear:
The Virtual Conference and trade show includes on demand access to all industry specific webinars, technical papers and conference presentations.

Cost:
Debt Relief Expo 2014 Virtual Conference and Trade Show access is FREE for Conference attendees.

All year window:
A growing list of presentations will remain available online to all attendees 365 days a year.

On Demand:
All of the audio/video recordings associated with the presentations can be downloaded on demand year round so you can view and listen on-the-go from the comfort of your desktop, laptop, tablet or smartphone.

Top reasons to attend Debt Relief Expo 2014 

  • Watch presentations from the industry’s best, brightest and most passionate thought leaders
  • It’s the debt relief industry’s largest gathering of professionals
  • Learn new ideas that you can apply to your business and work environment
  • Get customized advice and tips to act on immediately
  • A first look at the newest innovations in marketing and business services
  • Plenty of time to network, learn from, and have fun with peers from around the industry
  • Hear from experts and insiders about new solutions that might change the way you approach your work.
  • View industry specific webinars and download materials such as whitepapers, eBooks and much more.

Register today for FREE at: http://www.debtreliefexpo.com

Sponsor, Advertiser & Exhibitor opportunities at: http://www.debtreliefexpo.com/pricing.php

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CFPB Report Shows Complaints Rose 80 Percent in 2013

Annual Consumer Response Report Highlights CFPB Help in Getting Problems Addressed

The Consumer Financial Protection Bureau (CFPB) announced today that consumer complaint volume nearly doubled from 91,000 complaints received in 2012 to 163,700 complaints received in 2013. The CFPB’s Consumer Response Annual Report also highlighted the many issues the CFPB is helping consumers address – from foreclosure alternatives to simply receiving better customer service.

“Consumer complaints have become central to the work of this agency. They enable us to listen to, and amplify, the concerns of any American who wants to be heard,” said CFPB Director Richard Cordray. “They are also our compass. They make a difference by informing our work and helping us identify and prioritize problems for potential action.”

The Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the CFPB, established the handling of consumer complaints as an integral part of the CFPB’s work. When the Bureau opened its doors on July 21, 2011, it began consumer response operations the same day, accepting consumer complaints about credit cards. Since then, the Bureau has expanded its complaint handling in 2012 to include complaints about mortgages, bank accounts and services, private student loans, vehicle and other consumer loans, and credit reporting. In 2013, it began taking complaints on money transfers, debt collection, and payday loans.

Today’s report covers the 163,700 complaints received by the CFPB from Jan. 1, 2013 through Dec. 31, 2013. This is an 80 percent increase over the previous year’s 91,000 complaints. To date, including this year, the CFPB has received more than 310,000 complaints overall. According to the report, the top three complaints in 2013 by consumers were:

  • Mortgages: The number one most complained about consumer product was mortgages, accounting for 37 percent of overall complaints. For these approximately 60,000 complaints, consumers were most concerned with problems when they were unable to pay, such as issues relating to loan modifications, collections, or foreclosures.
  • Debt collection: Debt collection was the second most complained about category, accounting for 19 percent of overall complaints even though the Bureau did not begin accepting debt collection complaints until July 2013. For the approximately 31,000 debt collection complaints, consumers were most concerned with collectors attempting to collect debt not owed, communication tactics by the collectors, and collectors taking or threatening illegal action.
  • Credit reporting: The number three most complained about category was credit reporting, accounting for about 15 percent of overall complaints. For the approximately 24,000 complaints about credit reporting, nearly three out of four consumers were concerned with incorrect information on their credit report.

The Bureau expects companies to respond to complaints within 15 days and to describe the steps they have taken or plan to take. The CFPB expects companies to close all but the most complicated complaints within 60 days. Companies have responded to more than 93 percent of the complaints sent to them for response, and consumers have disputed only 21 percent of those company responses.

Sometimes, companies respond through non-monetary relief. About 11 percent of complaints fall into this category; for credit reporting complaints, companies respond to about one out of three complaints this way. Through the CFPB’s complaint process, consumers have received a range of non-monetary relief in response to their complaints, such as:

  • Foreclosure alternatives: Consumers have received mortgage foreclosure alternatives that help them keep their home;
  • Protection from debt collectors: After CFPB inquiries, debt collectors have stopped engaging in excessive collection communications with consumers;
  • Restored lines of credit: Consumers have had their credit lines restored when they wanted, or removed when that was their desired outcome;
  • Corrections to credit reports: Consumers have had their credit reports cleaned up either by having correct submissions given to credit bureaus or by having credit bureaus correct inaccurate information about their consumer accounts; and
  • Customer service: Many consumer problems are related to unanswered inquiries or incorrect information. After CFPB involvement, many customers had their formerly unmet customer service issues finally resolved.

The Bureau has also seen monetary relief for consumers in about 7 percent of complaints. This includes:

  • A median amount of $460 for mortgages;
  • A median amount of $126 for credit cards; and
  • A median amount of $111 for bank accounts or services.

Information about consumer complaints is available to the public through the CFPB’s public Consumer Complaint Database. A complaint is listed in the database after the company responds to the complaint or after the company has had the complaint for 15 calendar days, whichever comes first. If a company demonstrates within 15 days that it has been wrongly identified, no data for that complaint is posted. The database is updated nightly and includes anonymized complaint information. The database enables the public to see what is being complained about and why; and it enables consumer groups to identify troublesome trends.

Complaints inform the Bureau’s work and help to identify problems, which then feed into the Bureau’s supervision and enforcement prioritization process.

The Bureau will continue to work toward expanding its complaint handling capabilities to include other products and services under its authority, such as prepaid cards.

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