4 Your Money: Best ways to get out of credit card debt (2024)

PITTSBURGH —

New data released this month by the Federal Reserve Bank of New York shows household debt balances grew during the first quarter of 2024, and delinquencies also increased.

The report shows nearly one in five credit card holders are maxed out, using at least 90 percent of their limit.

Pittsburgh's Action News 4 spoke with local financial experts about the best ways to safely decrease debt.

"The truth is, only one person got you into this, and only one person is going to get you out," said David Martin, a certified financial planner.

If you are carrying a balance on credit cards from month to month, it can be challenging to get ahead of the mounting interest.

"It's the largest amount of credit card balances I have seen in my career," Martin said. "The easy way to say it is, it's a trillion dollars in credit card balances."

Two key factors contributing to debt that Martin points to are inflation and spending habits.

"We have trained a lot of Americans to spend, and it's hard to not spend once you've got in the habit of spending," Martin said. "I suggest to clients, first of all, that they try to figure out where not to spend. It's difficult because prices have gone up, and basic things cost more, so you're just spending on basic things as you watch your credit cards get a little bit deeper in balances."

But not in this family. Early on, Tom and Stevie Kocur chose to make a budget and stick to it.

"I don't think we've ever once, while we've been married, carried any kind of debt over from one month to another for credit cards," Tom Kocur said. "We take it pretty seriously in terms of making sure that we don't spend more than we bring in each month. We keep the credit card debt to a very minimum to zero."

Martin's advice is, first, get honest about your financial situation with a certified financial planner — and most importantly, with your family or partner.

"You cannot believe how many people didn't talk to their spouses about it," Martin said.

Then, he says, assess what you're spending and where you can cut down on spending.

• Pay as much as you can on the cards charging you the highest interest.
• Consider your options to transfer money to a lower-interest card.
• Be cautious of debt consolidation loans.
• And avoid touching your retirement savings.

"Don't borrow it from your 401(K). Really avoid that. The reason is, if you have $10,000 in a 401(K) at age 30, it's 20 (thousand) by 37, 40 (thousand) by 44, 80 (thousand), 160 (thousand). It's a $500,000 mistake by the time you get to retirement age. That's toxic. I can't touch that," Martin said.

But let's say you have exhausted your options.

"I can tell you that, probably in the last two years, I have personally noticed about a 30% increase in bankruptcies," said Michael Eisen, a financial attorney. "And I think that is primarily due to two things."

Eisen cited dramatic lifestyle changes resulting from the COVID-19 pandemic and inflation.

"You're robbing Peter to pay Paul. Now your credit cards are maxed out," he said. "What do you do? Well, sometimes you call me and we figure out, what can we do? Can we negotiate with your creditors? Can we get them to lower the interest rates? Can we get them to lower your monthly payment?"

If not, Eisen might suggest finding out if you are a candidate for bankruptcy and looking into options that, in the best-case scenario, get you in and out of bankruptcy in a matter of months.

"Bankruptcy really certainly is not the kiss of death it used to be," Eisen said. "I always ask clients, do you know anybody who has filed bankruptcy? And sometimes they say no. And I say, well, you do, but you just don't know they filed."