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South Florida Financial Expert Offers Solutions for Those With Depleted Credit Cards
MIAMI —Nearly one-fifth of credit card borrowers used at least 90% of available credit in the first quarter of 2024, according to the New York Fed Microeconomic Data Center.
“Unfortunately, this is my case and honestly, it’s all about survival,” Valeria Gomez told Ivan Taylor of CBS News Miami.
Her credit card is nearly maxed out, and although she waited until her early 20s to get one, she now faces a burden.
“About 90% of it is consumed,” Gomez said. “Specifically in Miami, in the last four or five years – pre-pandemic – everything has skyrocketed.”
“And the math says, ‘if you pay the minimum, if you don’t touch the principal amount owed in three years, that principal amount doubles,'” said Professor Deanne Butchey of the Department of Finance at Florida International University.
According to a Bankrate calculator, people with a card balance of $5,000, at a 21.6% interest rate, paying $100 a month, will spend more than 10 years paying, will spend $7,906 in interest, plus of the $5,000 principal.
Butchey had some advice for Gomez and people like her: “She should go to her banker, to her credit card company, please increase my credit card limit, because if you’re using more than 30% of the debt on any credit card, there will be immediate damage to your credit card score.”
Taylor asked Gomez, “How do you respond to people who can see that you’re young, you want to go out, and you’re not budgeting?”
Gomez responded by saying, “That’s inaccurate. I had to use my credit card for shopping, for gas, for the basic needs I have in life.”
Butchey says there is an additional ingredient that affects people in general: “I firmly believe that social media has a lot to blame.”
Butchey says people of any age feel pressured to follow others’ actions on social media without thinking about the cost.
Eliezer Arcia, also in his 20s, says that last January he called his credit card company to put an end to the nightmare.
“I’m going to stop using my credit card,” Arcia said and did so.
He says he now only uses his ATM card to avoid debt. He told us he felt he was close to maxing out his $2,000 limit, and his credit card bank extended his limit by another $1,000.
“But I found myself spending a little more than I tried to spend on a monthly basis,” Arcia said.
Butchey says canceling credit cards is not a wise decision because it affects a person’s credit score and when they need to make a larger purchase they won’t have credit for it.
“We have to create a budget and live within our means,” said Butchey, who also counsels consumers of all ages.
“When shopping with a credit card, ask yourself, ‘Do I want it or do I need it?'”
She says this helps her get out of the financial burden.