How to manage your credit card bills

Even with a strong economy, a growing number of people are having trouble paying their credit card bills.

Late credit card payments, while still low, have been ticking upward for the past two years, the Federal Reserve Bank of New York reported in May. Card delinquencies have been rising for borrowers under 30, in particular, but also for borrowers in their 60s, the New York Fed said.

Experian, a major credit bureau, said the average card balance as of May was $6,553, up slightly from an average of $6,506 in the second quarter of 2018.

Consumer advocates said they are concerned that more people will find themselves in trouble, should the economy slow. "I'm very worried about it," said Lauren Saunders, a lawyer with the National Consumer Law Center, which specializes in working with lower-income people.

There are steps, however, that consumers can take if they are having difficulty making payments. They can start by contacting their card companies to see if they can obtain a temporary interest rate reduction or a lower minimum payment. "I would recommend that people first reach out directly to creditors," Saunders said. "The earlier you do, the more likely they are to work with you."

Another option is to seek help from a nonprofit credit counseling agency. Participants can often get a free or low-cost budget review to help them identify areas where they may be able to cut spending and reduce their debt.

Consumers with more serious debt problems, however, may need a more structured approach, said Phil Heinemann, executive director of Debt Management Credit Counseling Corp., a nonprofit organization in Lighthouse Point, Fla.

If the proposed payment plan is approved, the agencies charge a monthly fee that varies based on the size of the monthly payment, but is typically capped by state law. The overall amount paid still represents a significant savings, Heinemann said, because of the lower interest rate on the debt, as well as the elimination of late fees and other penalties. (A handful of agencies, along with a few big creditors, are testing a new version of these programs that would cut the debt owed in half to make the programs more accessible for people trying to avoid bankruptcy.)

Heinemann said his typical client has about $10,000 in card debt, but he has seen much higher balances. It's important, he said, that the borrowers are able to afford the agreed-upon monthly payment. If they miss two consecutive payments, he said, creditors typically drop them from the program.

Kristen Holt, chief executive of GreenPath Financial Wellness, a nonprofit debt counselor in Farmington Hills, Mich., that provides services nationally, said the agency had seen demand for debt management services rise this year. Often, she said, clients are referred to GreenPath by their creditors. GreenPath's typical client has five different creditors, and an average debt of $20,000. The agency charges a one-time fee of up to $50 to set up a plan and monthly fees of up to $75.