Help for People Who Overspend Around the Holidays

Why paying off debt will be tougher than ever.

The holidays are celebrated as being a time of cheer, gathering together, and generosity. However, for some, this generosity can snowball into unmanageable credit card debt that they carry long into the new year.

A Look at the Numbers

The Federal Reserve Survey of Consumer Finances reports that in ​​the first quarter of 2022, the average credit card debt for a cardholder was $5,769 and that 44% of cardholders were carrying debt.¹ In addition to these yearly average numbers, a LendingTree survey found that 36% of consumers took on holiday debt during the 2021 season, averaging $1,249.²

Additionally, the National Retail Federation expects increase of 6 to 8% in spending this season over 2021.³ Resulting in another record-breaking year of spending. With credit card interest rates affected by the Federal Reserve's raising of general rates, the time it takes to pay off any debt will increase.

How is Debt Affecting Your Members?

The effect stress, which is caused by debt, can have is often overlooked, with many people losing sleep over their debt and experiencing negative physical issues. The APA⁴ found some of the most common to be:

• Heart disease
• High blood pressure
• Diabetes
• Migraines
• Depression
• Substance abuse
• Stomach problems
• Psoriasis
• Cancer

How to Help Members in Debt

Providing union members with credit counseling is a great first step to help them plan ways to pay back debt and create a personal finance plan to avoid repeating the situation and become more responsible in handling credit. A credit counselor can usually help:

• Offer money and debt management advice
• Help create a budget
• Assist with getting your credit report and scores
• Provide education materials
• Create a plan to pay down your debt
• Speak with creditors to make payments more manageable by negotiating extensions and lowering interest rates

They most likely can't help reduce the total amount owed.

When inquiring about a credit counselor, some helpful questions to ask include:

• What services do they offer?
• How do they offer counseling?
• What are the fees?
• What are their qualifications?
• Will there be a written contract?
  
  

When to Consider Bankruptcy

Bankruptcy is certainly a last resort, but for those who have insurmountable debt and have already spoken to a credit counselor and exhausted all options, it may be the only remaining option.

Before speaking with a lawyer and filing for bankruptcy, there are a few options you should explore:

• Credit counseling – as mentioned above, this is also a required first step from courts before you can file for bankruptcy
• Debt consolidation loan – if you have good enough credit, this option should be used to lower your monthly payments into a singular payment at a lower interest rate than your other debts
• Debt renegotiation – calling your creditors to lower the repayment amount can help decrease your total debt

If these steps cannot help you improve or eliminate your debt, then it is time to contact a bankruptcy lawyer.

Filing for bankruptcy is a complex process, and approval is not guaranteed, so it is recommended to have a bankruptcy lawyer file for you even though it can be done yourself.

Reducing Costs for Members

When someone is already in debt, it is difficult to spend money for the help needed to get out of debt. 

The cost of working with a credit counselor is quite affordable with prices ranging from completely free up to the nationwide cap of $79/month.⁵

The average lawyer fees for filing chapter 7 are $1,500-3,000 and for chapter 13 are $3,000-4,000.⁶ Although these fees may be higher than expected, it will be worth the cost to ensure a successful case.

Being able to give your members a solution they can afford is key. Legal and credit benefits like those included in our Legal and Personal Protection Plan help to cut costs associated with credit counseling and bankruptcy through partnerships and discounted legal help.

Learn more about Member Resources on our website or book a meeting to see how our services can help your organization.

¹ Average Credit Card Debt in America by Doug Miles, CFA
² 36% of Americans Took On Holiday Debt by Amanda Push
³ NRF Predicts Healthy Holiday Sales as Consumers Navigate Economic Headwinds by Danielle Inman
⁴ Stress in America: Paying with Our Health
⁵ How Much Does Debt Counseling Cost? by Gayle Sato
⁶ The Cost Of Bankruptcy by Bill Fay

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