Americans struggling to make ends meet can quickly find themselves in over their heads when credit card and other bills come due. Kim Love, 49, of Chesapeake, Va., was keeping up with her debt until she went on disability. Her income from working as a medical secretary was cut in half. Her husband also stopped working for medical reasons.
They soon had 11 credit cards, some with interest rates as high as 24 percent, and their bills topped $20,000.
"We didn't go out and buy a big plasma TV or anything like that," Love tells Renee Montagne. "It was just really things that we needed to try to survive on — medication, bills, clothes. So I don't think I would say that we [were] frivolous — just out there spending, taking a vacation and having a good time, because, no, we never did that."
Easy Credit Added Up
Love found it easy to sign up for credit. "I guess my credit was pretty good and they look at it and they say, 'OK, you're pre-approved ...'"
Love recalls that her thinking was motivated by pressing needs: "We need to get some medication in here this month or we've got to go to the doctor and we don't have the money to pay for it.
"So I accepted [cards] and that was not too good of a choice on my part," she says.
For help, Love turned to credit counselor Barbara Wright, with ClearPoint Financial Solutions, based in Richmond, Va. Wright says consumers come to her nonprofit community service organization with an average of nine credit accounts.
A combination of economic factors is landing Wright's clients in financial trouble, she says.
"We're seeing that a lot, with gas prices increasing, food prices increasing, housing increasing," Wright says. "But income is not increasing and people are more and more falling on their credit cards to make ends meet."
A Disciplined Approach to Reducing Debt
Wright reviewed Love's income and spending, and examined which expenses could be cut back. She developed a monthly payment plan to get Love and her husband out of debt. The couple moved in with Kim Love's parents, saving on rent, groceries, utilities and cable TV.
Love has reduced her bills from $21,000 in November 2006, when she first came to see Wright, to about $14,000 today.
"She's seeing that light at the end of the tunnel now," Wright says. "It's getting there. Slowly, but it's getting there."