New Federal Reserve Report Can Inspire Consumers To Give Credit

Paying off consumer debt can give your budget a kick

SAN MATEO, Calif., March 4, 2009 – New reports from the federal government show that Americans continue to carry significant credit card debt, and's Ethan Ewing urges individuals to take steps now to eliminate that debt. 

"With the economy in flux, it is more important than ever to stop paying interest to the credit card companies and to stop living beyond one’s means," said Ewing, president of free online consumer portal 

Last month, the Federal Reserve issued a new look at consumer finances with its Survey of Consumer Finances for 2007 (the most recent year for which data is available).(1) The report has some good news: From 2004 to 2007, Americans' net worth increased significantly, which provided many people a cushion for the losses that have occurred in the past year. More than half of Americans reported saving in the previous year. And 40 percent of Americans with credit cards do not carry a balance; 27 percent of Americans do not have credit cards at all. 

But credit card debt -- those balances carried from month to month -- remains a concern. Americans went deeper into credit card debt, by 25 percent to 30 percent, during that 2004-2007 period. U.S. consumers owed a total of $2.55 trillion in consumer debt at the end of 2007. In December 2008, this tallied to an average of $5,710 in credit card debt per credit card borrower.(2) 

Those 60 percent of credit card holders who owe month after month can employ Ewing's six-step program to knock out debt for good. 

1. Track spending. For one week, carry a small notebook and write down every purchase. "You will soon see how small purchases add up -- coffee, fast food, candy bars, drugstore purchases and items you 'just pick up' in a shopping cart," Ewing said. "Or you might learn that you do not spend much frivolously and need to look more closely at ongoing bills or income. This step alone is likely to reduce a determined saver's spending habits." 2.  Make a budget or spending plan. Creating a budget means taking responsibility for where your money goes, rather than allowing whims, advertising or habits to influence spending. offers a free budget guide online at The key element, Ewing said, is to divide spending into the categories of "musts" (food, housing, basic clothing, transportation, education) and "optional" (dining out, entertainment, gifts).  3.  Use cash. Pay bills with checks or set up automatic payment plans to eliminate worry about a late or forgotten payment. For all other expenses, use cash. Debit cards can be helpful for transactions for which a credit card is required – such as paying for gas at the pump – as they allow people to still pay with available cash rather than risking piling on debt. Be cautious using a debit card online, as it can create a theft risk. 4.  Trim the fat. Examine a budget's "optional expense" category to trim unneeded costs and apply that money to pay off debt. No one needs premium TV channels or restaurant meals. Serious debt-cutters often even axe modern-day "necessities" such as cell phones, home Internet access and caller ID. Just putting $15 more a month toward a credit card bill makes a difference (see #5). 5. Pay more than the minimum. Pay every bill in full, on time; if you cannot afford to pay for something in the month you purchase it, do not buy it. If, however, you cannot pay your credit card bill in full for some reason, pay more than the minimum payment. Minimum payments are set at a very low percentage of the balance, and typically go primarily to interest and fees, rather than paying down principal significantly. Paying only the minimum will maintain a debt position for years. The resulting total interest payments could exceed the amount borrowed in the first place.   

"If you cannot pay all of your debts down in a short period of time, then prioritize," Ewing advised. Make minimum payments on the cards with the lowest interest rates, and put all excess cash to the card with the highest interest rate. Once that is paid off, put excess cash to the card with the second-highest rate, and so on until you are debt-free. 6. Seek help. "If you have serious debt that you cannot pay, know that help is available, especially if the situation was caused by a short-term problem such as a medical emergency," Ewing said. "If absolutely necessary, you could borrow from relatives, borrow against life insurance or retirement funds, or consolidate old debt onto a no-interest credit card. If you need more support, seek out a credible debt resolution advisor." To learn more about debt resolution, visit  

"When it comes to statistics about credit card debt, you can choose to be among the indebted, or you can choose freedom for yourself and your family," Ewing said. "Follow the steps above to pay off your debts so you can stop paying interest to your creditors and instead start saving for the future. Then you can be one of the lucky ones who are prepared to ride out any economic bumps that lie ahead."  

About (

Based in San Mateo, Calif., is a free one-stop portal where consumers can educate themselves about complex personal finance issues and comparison shop for products and services including credit cards, debt relief assistance, insurance, mortgages and other loans. As the online portal to Freedom Financial Network, LLC, the company has served more than 50,000 customers nationwide since 2002 while managing more than $1 billion in consumer debt. Its RSS feed is available at holds the No. 257 spot on the Inc. 500 list for 2008, and the No. 3 spot on Entrepreneur Magazine's Hot 100 list of the fastest-growing U.S. companies. Company co-founders and co-CEOs Andrew Housser and Brad Stroh were named to the Silicon Valley/San Jose Business Journal's "40 Under 40" list in 2008, and were recipients of the Northern California Ernst & Young 2008 Entrepreneur of the Year Award.