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Sat, Nov. 16

Credit card debt: Manage it, or it will manage you

Debt. It’s a drag.

In most cases, it’s best to avoid at all cost.

Sometimes, however, it becomes necessary for one reason or another.

Credit card debt is particularly common because it’s easily acquired.

Multiple studies, including one released by the Federal Reserve in 2014, have found that about seven in 10 Americans have at least one credit card.

Of those with credit card debt, the amount owed by the average U.S. household is $15,762, according to a recent study by NerdWallet. This totals about $733 billion nationwide.

Paying off debt

A common budgeting guide is the 50/20/30 rule.

The concept proposes that 50 percent of someone’s income goes toward necessities, 20 percent goes toward savings and paying off debt, and 30 percent would be discretionary spending, according to the personal finance company LearnVest.

If a Prescott resident making the area’s median income amount of $28,788 (per capita) were to follow this, he or she would be putting $480 each month toward that savings and debt repayment portion.

Paying off credit card debt as quickly as possible is especially important because it’s often the most expensive to carry. Commonly referred to as annual percentage rate (APR), credit card interest rates tend to hover around 15 percent on average, according to

This compares to a 3.49 percent rate for a 30-year fixed mortgage or a 4.59 percent rate for a 36-month new car loan, according to

credit scores affect rates

Interest rates for any sort of debt are based on one’s credit score. Credit scores range from 300 to 850, with higher scores being better.

For instance, if someone has poor credit — between 300 and 550 — then the credit card APR will be upwards of 28.9 percent, according to Those with excellent credit — between 740 and 850 — may only face an APR of 7.99 percent.

According to Fair Isaac Corporation (FICO), the following proportions of consumers have scores in the following ranges:

• Up to 499: 2%

• 500-549: 5%

• 550-599: 8%

• 600-649: 12%

• 650-699: 15%

• 700-749: 18%

• 750-799: 27%

• 800-850: 13%

As these figures indicate, the majority of the population has a credit score above 700. Anything above 680 is considered “good.”

What a late payment can result in

Being late on your dues can result in a number of repercussions, according to

One is a late fee. This may be between $25 and $35.

Another is an increase in the bill’s interest rate, often resulting in what is known as a penalty APR. This can be as high as 29.99 percent for credit cards.

If more than 30 days tardy, the payment then shows up on your credit report and may stay there for as long as seven years. The later the payment, the more penalties you’ll face.

Any such flags on your credit report can ultimately decrease your credit score.

“Payment history information typically accounts for nearly 35 percent of your credit score, making it one of the single most important factors in calculating your score,” as stated on “Just one late payment can drastically lower your credit score, especially if you have a good or excellent credit score.”

Watch out for scammers

When faced with debt, it is common to be solicited by supposed credit repair companies promising to completely erase bad credit in a snap.

Such promises are frequently bogus, for poor credit is not so easily repaired, according to the Federal Trade Commission. Rather, it takes time and a concerted effort to pay off the debt and prove to creditors that you’re not a risk to them.

Why to be wary:

• Many of the services offered may be illegal or are services consumers can do on their own for free by contacting their credit card company directly.

• Upfront fees for lowering your rates may be disguised by “kits” or “coaching” offered by companies promising to lower interest rates.

• Be cautious of companies that advise you to stop payment or contact with your credit card company or another lender.

Scammers disguised as creditors are also something to look out for.

Marilyn Huffman, regional director for the Better Business Bureau - Yavapai County, said consumers have reported that they or a family member have received a call from a collection agency making threats that they will be arrested later that day if they do not make a payment.

“Some have even had their employer called,” Huffman said. “This is not the way collection companies are supposed to work.”

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