Be debt-free in the new year
The Christmas holidays ended almost a month ago, and though the gifts remain, so do the bills.
Many people face large amounts of debt following the economic downturn, the collapse of the housing market and holiday overspending.
Area debt experts said the first step to being debt-free is to use the right debt-assistance services.
Some companies offer programs to rid people of their debt, but in the end, the fees charged by the company cause those in need to sink deeper and deeper into debt.
"We get confused with the people on TV who are predators," said Tom McNeely, of Consumer Credit Counseling Services of Catawba Valley.
CCCS of Catawba Valley offers free, confidential financial counseling.
Attorney General Roy Cooper also warned citizens about businesses that take advantage of those in need.
"These operations typically collect large, upfront fees, but reach very few settlements with creditors, leaving you deeper in debt," Cooper wrote in a press release. "Under North Carolina law, it's illegal to collect any upfront fee for debt settlement services."
CCCS of Catawba Valley provides budget counseling, credit counseling, debt management, bankruptcy counseling, consumer education and other debt-related services.
McNeely said he commonly advices people with between $30,000 and $60,000 of credit card debt. Most of these people lost their jobs or got behind on payments, and they never caught up.
"The majority of (debt) is where this recession has hit them," McNeely said.
For people currently battling debt or avoiding sliding deeper into debt, McNeely offers several tips.
He said the first step to managing and preventing debt is to re-evaluate credit-card usage.
"Basically, you don't really need but one credit card," McNeely said.
That means store cards and other forms of speciality credit cards are unnecessary.
If people choose to use credit cards, McNeely advises users pay careful attention to fees, charges and penalties outlined in the card's terms of agreement.
Credit card companies can increase a users' minimum payments, reduce their credit lines and increase interest rates.
"When people start getting behind (on payments), they start getting late fees," McNeely said, adding that its a downward spiral as more late fees pile up and additional debt increases.
Poor credit history affects consumers' credit scores, which are tools used to gauge consumer activity. Monitoring credit scores is another important way for people to stay on top of their financial situations, McNeely said.
People are allowed to access credit scores once a year from each of the three major credit bureaus. McNeely said each bureau usually provides about the same score, so he recommends using one bureau every four months to keep a watchful eye on credit scores year-round.
"If you see something that isn't yours (on the credit report)," Cooper said, "you may be the victim of identity theft — meaning that someone pretending to be you has opened new accounts or taken on debt in your name."
To report identity theft, call 1-877-5-NO-SCAM for help.
McNeely also recommends making a monthly expense tracker to chart every dollar spent in one month. One of his clients made an expense tracker and realized her family spent almost $400 a month on coffee.
Consumers can track expenditures, discovering where their money goes and what expenses can be trimmed.