All Things Real Estate: Dealing with the impact of credit card debt

All Things Real Estate: Dealing with the impact of credit card debt

Credit card debt as of the fourth quarter of 2022 was a record $986 billion after it jumped by $61 billion from the third quarter. Residents of Connecticut, New York and New Jersey had the top three spots for the largest amounts owed.

It is obvious that members of Gen X have the highest, followed by Baby Boomers and then millennials; and the smallest credit card debt holders are GenZs. However, many are in some type of financial stress and difficulty and between their student loans ($1.6 trillion owed) and credit card debt things do not look very promising.

It is so easy to get into debt today as the insatiable appetite for what some may call “free and easy money” has truly ruined many young people who have a real problem paying their bills and dealing with credit card companies.  The companies seem to provide their cards to almost anyone, especially on college campuses where they have a captive audience to get everyone qualified and provide that alluring plastic to almost 99.9% of the students who apply.

Do they think that their parents will pay the bill every month if the children don’t? Maybe in some cases that may be true.  However, the vast majority of students are in somewhat of a quandary and do not have the funds to make at least their monthly minimum payment (and there are those parents who might be closer to retirement, and don’t have the funds to help their kids either!).  This becomes a vicious cycle where interest compounds monthly.  When you add their student loans to the mix, this becomes a catastrophic and deadly situation that will potentially stay with them for the rest or their lives if it isn’t dealt with in a logical, pragmatic and well thought-out plan.

When paying on time becomes a problem, the best way to handle these tenuous and stressful situations is to deal with them head-on by communicating with your credit card issuers on a regular basis.  This will have an adverse effect on your credit scores and history if you are late on your monthly payments or if you don’t consistently pay the minimum monthly payment.

Most important will be to always ask the credit card representative for their name and I.D. number to keep accurate records of whom you speak with as the majority of banks are required to have their employees provide their identification.  However, there are times when they do not have an ID number, but will provide their last names if asked.  Some refuse and I have had that happen to me and when I ask for a supervisor, then all of a sudden they provide me their information.

It is extremely important to take notes, as some reps may say that they will, but don’t as you find this out when you call back the next time and the next representative says “there are no notes.” Unfortunately, when you are consistently late, those notes give you more credibility.  Do this each and every time that you are on the phone with your credit card companies.

Most companies do offer hardship programs, whereby they will provide a smaller payment over a 3-5 year period.  But you will most likely not be able to use your card going forward as it will be canceled. Also there are times when you can negotiate for no further interest to be accrued as long as your payments are made on time. The worst case scenario is declaring Chapter 7, 11 or 13 personal/business bankruptcies to either wipe out your debts or settle for pennies on the dollar.

There will be an expense to hire an attorney to handle this task (we can assist with professional and knowledgeable attorneys to help).  I personally do not recommend this action unless there is no other way out of your situation and your back is against the wall.  By taking this path, you will have this on your record for at least seven years.  However, after two years or less you can apply for a secured credit card, whereby you would send whatever dollar amount that you want as a credit line directly to the bank as security.  This can be the quickest way to re-establish your credit and credit history.

We have helped some re-establish their credit, enabling them to purchase a home and condo in a very reasonable time period.  However, co-ops will look more intensely and be more intrusive with respect to your credit, unless it is fairly pristine.  There are credit-fixing companies (we have what I believe to be one of the best in the industry) that can raise your credit scores by removing derogatory remarks from your credit history.

They usually charge per item removed or a flat rate, depending on how poor your credit history and length of time.  If you want to purchase, we have some creative methods that we use to enable you to become a homeowner.  However, the simplest way is not to abuse your credit and to use no more than 10-25% of your credit line, so as to keep your credit scores as high as possible, so you will qualify for a mortgage.

Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 in Great Neck.  He has 40 years of experience in the Real Estate industry and has earned designations as a Graduate of the Realtor Institute (G.R.I.) and also as a Certified International Property Specialist (C.I.P.S) as well as the new “Green Industry” Certification for eco-friendly construction and upgradesFor a “FREE” 15-minute consultation, value analysis of your home, or to answer any of your questions or concerns he can be reached by cell: (516) 647-4289 or by email: [email protected] or via https://WWW.Li-RealEstate.Com  Just email or snail mail (regular mail) him with your ideas or suggestions on future columns with your name, email and cell number and he will call or email you back.


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