Broadcast Retirement Network’s Jeffrey Snyder discusses how to unravel credit card debt with Debt.com’s Howard Dvorkin, CPA.
Jeffrey Snyder, Broadcast Retirement Network
Good morning, welcome back to the Broadcast Retirement Network. This is BRN AM for Tuesday, April 9th, 2024. And our top story today, financial emergency.
One in three Americans have maxed out their credit cards for survival. And joining me now to discuss this and a lot more, Howard Dvorkin is a CPA with Debt.com. Howard, so great to see you.
Thanks so much for joining us on the program this morning.
Howard Dvorkin, CPA, Debt.com
Thank you for having me. I appreciate the opportunity.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, well, this is, I mean, this is an amazing survey. It’s amazing because it’s great information, but it amazes me because U.S. credit card debt has reached a record high of $1.13 trillion. I want to get your reaction to that.
Howard Dvorkin, CPA, Debt.com
It is surprising because before the pandemic, the credit card balances or credit card debt for the country was at about a trillion dollars. Now, what happened was during the pandemic, people weren’t using their credit cards. They weren’t traveling.
They weren’t going out to eat. They also were getting a ton of money from the government. So that trillion dollars in credit card debt got paid down to about a 500 billion, half, a 50 percent drop.
The challenge now is that that same credit card debt is now at $1.1 trillion, and it’s likely to exceed $1.5 trillion in the next few years. So what that’s telling us at Debt.com is that people are using their credit cards to make up for the deficits in their budget because things have gone up due to inflation. Gas has gone up.
Food prices have gone up. Everything has gone up. And the people’s wages have not increased that substantially to pay for it all.
So they’re using the credit cards as a form of supplemental income.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, and it’s they’re being in almost in a way they’re forced into it because they probably don’t have emergency savings. They have very little savings. And as you said, wages haven’t gone up, haven’t kept pace with the inflation they’re experiencing.
Howard, when you look at the demographics, and we were having a conversation in the virtual green room because there is no real green room, when you look at. Well, I am in a right. I’m in a green room.
But when you look at the demographics, does anything surprise you when you look at who has credit card debt? You would expect younger generations to have some credit card debt because they’re newer into the workforce, not earning as much. But it actually starts to trend a little bit higher.
Howard Dvorkin, CPA, Debt.com
Well, you are correct that the younger folks do have credit card debt, but they also don’t have the earnings to justify significant credit balances or credit available credit allowances from the creditors. The older folks are tending to have higher debt. And certainly into retirement, they’re retiring with debt.
We never saw that 20 years ago. I mean, here and there, we would see it. But most people that were in retirement or going towards retirement got into debt for a number of reasons.
The most likely one was they were helping out their children, and that they pulled down some significant debt. Nowadays, the people are retiring with debt with no ambition or no hope of paying it off because as you retire, your income typically is reduced. And that is challenging for a lot of people, especially in retirement.
So that is concerning me because what that says is, how are these people going to pay off their debt? The answer is they’re not. They’re going to die with unsecured debt.
Jeffrey Snyder, Broadcast Retirement Network
And let’s kind of play that through. What does it mean, Howard, just for myself and the audience, if you are not going to pay off your debt and you pass away, what happens? Do your beneficiaries, if you have beneficiaries, do they have to pay that unsecured debt, that credit card, outstanding loans, whatever?
Howard Dvorkin, CPA, Debt.com
Two things happen, Jeffrey. The estate is responsible for paying that debt off. So basically, it’s not your beneficiaries, but whoever’s managing the estate, if there’s assets, they’re responsible for paying that debt.
If there are no assets or not enough assets, that debt dies with you and there’s nobody to collect from. And let’s face it, people that are passing away and that are in retirement that have debt, there’s a reason why they have debt, because they don’t have assets. They don’t have money to pay for that debt or pay for those expenses.
So the credit card companies are not very aggressive at going after debt of deceased credit holders. So that is a challenge, certainly.
Jeffrey Snyder, Broadcast Retirement Network
But I’m sorry, I was going to just follow up on that and then I want to take a quick break and pick up the conversation. But just to follow up on that, Howard, does it mean the rest of us who are left with some credit card payments or credit card debt, we actually pick up the freight? Because a company is probably going to pass that along to the remaining people in some way, shape or form, either higher fees, higher interest rate, right?
I mean, when they they’re not just going to…
Howard Dvorkin, CPA, Debt.com
Not necessarily, Jeff. We’re in a capitalist society and credit cards are capital in nature. And the reason why I’m saying that is whether there’s a bunch of people defaulting or not, those credit card companies, their sole purpose is to maximize profit.
So they’re going to charge you as much interest as you possibly can without you walking and moving your debt to another card lender. And they’re going to hit you with every fee possible under the sun. So it’s not like the government.
When somebody doesn’t pay, other people will pick up. In lending, there’s a certain amount of likelihood and in your projections that certain people will not pay. And that goes into their business model.
It could be 5% of the people don’t pay. It could be 30% of the people don’t pay, depending on what subset of debtor you’re going after. But that’s all built into the rates.
So if one group falls off, it doesn’t matter. They’re still going to maximize their interest rates.
Jeffrey Snyder, Broadcast Retirement Network
Yeah.
Howard Dvorkin, CPA, Debt.com
Well, Howard, I need to take a very quick break.
Jeffrey Snyder, Broadcast Retirement Network
When we come back, we’re going to talk more about managing your debt, how to pay it down. You’re going to want to stay tuned right here on BRM AM. Imagine a new television network that will make you richer, healthier, and in control of your financial future.
This network is for the policewoman in Nashville, Tennessee, the baker in Dubuque, Iowa, the teacher in Lexington, Kentucky. We want to make the idea of savings and retirement culturally relevant. But what do you see as a defining issue of the midterms?
Especially for the smaller businesses. I mean, they are the lifeblood of the American economy. Featuring exclusive interviews, current affairs, and docu-series.
33 years old, you retired early. The philosophy is money only matters if it helps you live a life that you love.
Howard Dvorkin, CPA, Debt.com
But you got to start thinking about retirement as soon as you get in.
Jeffrey Snyder, Broadcast Retirement Network
The Broadcast Retirement Network will drive very high engagement with premium partnerships. So this isn’t retirement and savings for your parents or grandparents. This is for all Americans.
And we’re going to change the way you think about money. Welcome to the next frontier of retirement and savings. This is BRM, the Broadcast Retirement Network.
Well, Howard, thanks so much for staying with us. Really appreciate you hanging around for segment number two this morning. Thanks so much.
Let’s talk about paying off this debt. And a lot of people, as we already know, may have credit card debt. They may have other debt.
Let’s talk about a path forward. How do I, if I have a debt, begin to pay that off so that by the time I die, I don’t have unsecured debt?
Howard Dvorkin, CPA, Debt.com
As I’ve said in the past, I’ve been doing this for 30 years. There’s no one magic ticket to get your debt paid off. The first thing is you got to know where you are.
On debt.com, we have plenty of tools on there to figure out where you are. Budgets and you got to know what your income is. And certainly, you know, all your income, not part of your income, your after tax income.
You also got to know what your expenses are. So what you’re spending your money on. And we have a new product that we’re coming out with on debt.com called Instant Debt Advisor. And I suggest people go to that on our site at debt.com because it will tell you how to get out of debt. It does a lot of this for you. But basically, you got to figure out how much income you have coming into the house.
You got to figure out how much expense you have going out. And you have to see if these expenses are reasonable. And if they’re not reasonable, what are you going to change?
Do you need to get a Starbucks coffee every day for $5, which will equate to $3,000 a year thereabout, which is a lot of money. Do you need to go out to lunch every day? Can you use regular gas versus premium gas in your car?
Do you need to spend, do you need 500 channels on your cable bill? Or can you get away with maybe cutting the cord and saving money? Things that you should look at and drill down and try to get away with the most you can without spending more than you have.
And basically, I always tell people about 20% of people’s budgets are fat, meaning that could get cut right out of their budgets, and they’re not even going to feel it. So you dial down or drill down on every single expense, you can cut way back. Then you look at your debt.
Okay, how much debt do I have? Who is it with? Who’s charging me the most interest?
And that’s really what the key. Some people say, pay off your credit cards due to the balances. I want to pay off the small balances.
No, pay off the balances that are charging you the highest interest rate first and start to pay that. If you need guidance, and most of us are not trained to figure out all this stuff. We’re out.
We’re trained in very, very different ways. I just happen to be a CPA who has been doing this for the last 30 years. So I’m pretty good at this stuff by now.
And so are the staff at debt.com. So maybe give a call to debt.com or fill out an application. We’ll have somebody call you and basically talk to a credit counselor to see what the best path forward is.
There’s five ways to get out of debt. One way is do nothing and be a slave to your credit cards and take the next 30 years of your life to pay them off. That doesn’t make a lot of sense a lot of the time.
Another way I call the ostrich method. Stick your head in the sand, think good thoughts, and maybe your debt will go away by itself. Not a good strategy.
A third way is bankruptcy, which people go to automatically. But that’s usually not one of the first methods of getting out of debt. That should be the last thing you do.
And that’s only for desperate people. You should go talk to a credit counselor. And we can at debt.com can hook you up with a debt credit counselor that’s certified, that is approved by us. And they will go do a full budget on your behalf and figure out what is the best program for you to get out of debt. Maybe it’s taking a loan. Maybe it’s going into what’s called a debt management program where you pay 100% of your debt, but not at those crazy interest rates.
Or maybe it’s a debt settlement where you pay 50 cents on the dollar, but you sacrifice your future credit as a result. So there’s lots of ways to get out of debt. You just got to figure out the one.
And that’s the hard part, figuring out the one that works for you.
Jeffrey Snyder, Broadcast Retirement Network
Howard, I want to end the interview. And I probably should have asked you this question after our first question in segment one. Do you think that when you look at the generations, that there is a sense of urgency?
So when I hear credit card debt and I have credit, anytime I want to have something on my credit card, I want to pay it off almost immediately. Do people, when you look across the generations, have the same or disparate sense of urgency when it comes to debt? And more importantly, credit card debt with double interest rates.
Howard Dvorkin, CPA, Debt.com
So it’s an interesting question. When we were growing up, Jeff, and anybody in their 50s or older, when we heard debt, debt was a bad thing. Bankruptcy was the worst thing you could possibly do.
Carrying debt and owing somebody. And the reason why it was so bad is because chances are you had grandparents or maybe parents that lived through the depression and they saw people’s homes and businesses being taken away because they had debt. The reality is that debt is still bad.
It’s been accepted by the average person out there more readily than it was before. And a lot of people grew up in households, and I’m talking 50 and under, that grew up and debt was just the way they got by. They got by by carrying debt.
And this is what my parents did. And it’s just a way of life. Well, I got news for you.
The younger generation, debt is not a way of life. It’s the greatest non-discriminator of all time. It doesn’t matter if you’re blue, purple, fat, skinny.
It will eat you up. It’ll tear you to pieces and it won’t let go. And the reality is very simple.
You can’t have debt. It destroys lives, whether it’s your life or your children’s lives. Debt is something you cannot be accepting of.
You have to pay it off immediately. Younger folks embrace it because chances are their parents were in debt and are in debt still. And there’s a whole big problem with teaching people in this country about debt.
Because we’re looking at the schools and there’s no formal education on debt available. So the schools are thinking that the parents are teaching the kids and the kids, the parents are probably in worse shape and no less than the kids. Now we’re seeing all this Instagram and Snapchat about, you know, advertisements.
I have debt and this is how I got out. I made a million dollars last year because of, you know, this internet thing. It’s fake.
The key is don’t use your credit cards. And if you have to use your credit cards, pay them off when the bill comes in.
Jeffrey Snyder, Broadcast Retirement Network
Yeah. Well, yeah, I mean, really well said. And for me, it always comes down to your freedom, individual, personal freedom.
You want to have freedom. You don’t want to be beholden to anybody. Howard, great to talk to you.
Thanks so much for joining us. And we look forward to having you back on the program again very soon.
Howard Dvorkin, CPA, Debt.com
Thanks so much. It was a great, great time. I enjoyed chatting with you.
Jeffrey Snyder, Broadcast Retirement Network
And that wraps up this episode of BRN AM. Have a topic of interest, someone you think we should talk to, then drop us a line. And don’t forget, for all the latest curated news and lifestyle, wellness, finance, tech, so much more in all in one place.
Check out today’s edition of our daily newsletter, The Morning Pulse. Want to search our archives, check out our latest content, then visit our website. We’re backing in tomorrow with another edition of BRN AM.
We’ll have a very special guest and, of course, another important topic. Until then, I’m Jeff Snyder. Stay safe, keep unsafe, and don’t forget, roll with the changes.
Now is your opportunity to co-create content around any topic on the FIRST Lifestyle and Wellness Network. Reach a global audience through our platform and co-own exclusive branded content. All of our programs are available on demand and also as audio-only podcasts, so you can take us on the go.
Broadcast Retirement Network. Available anytime, anywhere, and on any device.