Crack Down on Credit Card Debt

June 11, 2008 — -- Amanda McCormick is, like many college seniors, focused on school and work. But what people don't see is her heavy financial burden.

Like so many other university students —and Americans in general — McCormick is racked with credit card debt. She was hooked on paying with plastic, perhaps bordering on an addiction.

"I am 21 years old, and I have more debt than the average American family," she said. "The future for me has a lot of debt, basically. That's what the future is. I'm just trying to get out of it while I can, while I'm still remotely young."

She works three jobs to help decrease her financial obligations, but McCormick still is drowning in $22,000 of credit card debt that has only gotten worse over time.

"I am working so much and I don't see a dime of the money," McCormick said. "It encompasses my life, so in a way it is an addiction. It is everything I think about all the time."

Good Morning America worked in partnership with The Wall Street Journal's Marketwatch to address a growing trend among America's consumer culture - credit card addiction.

Her story is similar to Paula and Andy Frederick, who recently celebrated their 20th wedding anniversary. The pair opted not to have any fanfare to mark the momentous occasion because of their bills.

The Fredericks have accumulated $40,000 in debt on 15 different credit cards.

"They just make it so easy. The introductory rates are 0 percent," Paula said.

As their debt grew, their money troubles began to consume their every thought.

"I couldn't sleep at night. I started to get sick," Andy said.

So the Fredericks opted to get help with their finances and looked to their pastor for help.

"We knew if we were going to step out and reach for help that our church family was going to support us and encourage us and hold us accountable through the process. Whereas if I reached out to family or friends, I was afraid of being judged or ridiculed," Paula said.

Getting Your Debt in Check

Across the nation people are finding themselves saddled with debt, much of it on credit cards with increasingly high interest rates.

"The typical American has $9,800 in credit card debt and to put that in perspective — [that is] way more than the rest of the world. The average person in the UK has $5,500; typical German $3,500 average Italian $1,200. We are way overboard walking around with six credit cards in our wallet, five more than we need," said "Good Morning America" financial contributor Mellody Hobson.

"More and more Americans are experiencing this. This is not just big spenders. It's everyday people," Hobson said.

Many have turned to debt counseling agencies to help them get control of their finances again.

Web sites like debtorsanonymous.org and www.girlsjustwannahavefunds.com offer aid to people in debt.

Hobson said she loves the idea of credit counseling.

"I think support groups are a terrific idea. You get a sympathetic audience, you learn together and really grow together. I'm a big fan of that idea," Hobson said.

She suggested the The National Foundation for Credit Counseling, which has counseled more than 1 million people.

"They have 900 affiliated offices across the country, and they have very, very strict accreditation standards for their counselors," she said. "They do a lot as a service for little or no money, a very nominal fee."

Hobson suggested people veer away from infomercial organizations and places that offer to take on debt and place it all on one bill.

Cash Is King

To avoid debt people should use cash whenever possible, according to Hobson.

"One of the things I talk about over and over again is making a commitment to use cash," Hobson said. "It's more the obvious reason that you won't be paying all of that interest. But there's another reason. Studies show that the typical bill that you pay with a credit card is 12 to 18 percent higher than if you use cash. It's just one way of managing your budget."

She added that consumers should track their expenses.

"A lot of people say to me, 'Mellody, I don't want to write down what I spend. Just like when I'm on a diet, I don't want to write down what I'm eating every day.'"

"There's a back doorway to do that. Make a commitment to take out a certain amount of money once a week. Make sure that money sticks with you the entire week. It's a back doorway of budgeting and not using credit cards in that situation," Hobson said.