PEMBROKE PARK, Fla. – The next economic recession could be in the works.
At least that’s what analysts predict and recent calls to the Call Christina hotline – a majority of which pertain to debt – reflect.
"Credit card debt is the highest since August of 2009," Matt Schulz, an analyst at CreditCards.com, said.
Synchrony Financial, the largest distributor of retail store credit cards, recently released an 8-K report showing that more consumers are missing payments.
"We could see a recession anywhere between 18 to 24 months," Brad McMillan, chief investment officer at Commonwealth Financial, said.
Although there is some agreement among economists that a recession is on the horizon, when it will hit is still up in the air.
Cem Karayalcin, chairman of economics at Florida International University, said while a recession is on the horizon, it is too early to predict when it could hit.
"U.S. expansions and recessions are irregular, so it is impossible to say when exactly the recession will start," he said. "But there will be one."
There are a number of warning signs of a slowdown in the economy.
"You can look at the GDP growth rate, you can look at the unemployment rate (and) the job creation rate," Karayalcin said. "The job creation rate, for example, was much lower than expected in the last two months. We do see a slowdown in the U.S. economy when we look at these numbers."
The U.S. economy added 38,000 jobs in May, the worst monthly jobs gain since 2010, according to the U.S. Department of Labor.
When looking at consumer debt, a paper by economists at Princeton University and the University of Chicago shows rising household debt is also an indicator of lower economic growth and overconfidence.
Retail credit cards can provide a glimpse into the spending habits of the average consumers. New data suggests that people are signing up for retail credit cards – which generally have highly interest rates than regular credit cards – that they can’t afford.
HOW TO TACKLE DEBT
Although the logic for how to stay out of debt seems fairly sound – don’t spent money you don’t have – it’s often easier said than done.
"Every time I look at their budget they always have a lot of money left over," Chad Van Horn, a consumer attorney, said. "But then I look through their bank statement and it doesn't tell the same story."
Schulz said consumers need to look at the type of debt they’re getting into.
"Ask yourself is it a short term thing, like medical debt or joblessness, or is it something where you're not that great at paying your bills on time or resisting the lure of extra credit," Schulz said.
Here are some tips for getting out of debt:
Figuring out a budget: "Let's put a 12-month process together that's going to get us to those zero balances," Van Horn said.
Consider paying off the high interest balances first: "It's going to give you more money at the end of the day,” Van Horn said. “So if you pay off the higher interest rate card, you're going to have larger amounts to put toward the lower interest rates later.”
Ask your credit card company for a lower interest rate: "Banks know that they have to compete and they have to work with their card holders in order to keep them from jumping ship to another offer that's out there," Schulz said.
Consolidate: Combine all bills into a new credit line or a balance transfer to a card with no-interest, according to the Consumer Financial Protection Bureau.
Bankruptcy: Remember, filing for bankruptcy is not for everyone so seek professional advice.
"Live an interest free diet. Don't spend what you can't afford to pay off because that interest builds on itself month after month," Van Horn said.
BE ACTIVE ABOUT DEBT
One of the worst things anyone in debt can do is ignore the problem, according to Shulz.
"Inaction and keeping your head in the sand is going to cause more and more trouble and make your problem worse," Schulz said. "So you need to attack that debt issue head on."
The FTC recommends consumers take a realistic look at their financial situation in order to cope with debt. That means looking at money in taken in versus money spent.
The organization advises that people make a list of income from all sources, fixed expenses, such as a mortgage, rent or car payment, then list varying experiences, such as entertainment and food. This is a helpful way to keep track of spending patterns and key-in on necessary expenses verse luxury expenses.
HOW TO AVOID DEBT RELIEF AND CREDIT REPAIR SCAMS
There are legitimate companies out there that promise debt relief, but be aware of scammers.
The FTC reports that debt relief service scams target people with significant credit card debt by falsely promising to negotiate with their creditors to settle or otherwise reduce your repayment obligations.
These scammers will target people in debt due to mortgages, student loans and auto loans.
To avoid getting scammed, avoid any organization that have the following traits:
Charges fee before debts are settled
Guarantees it'll make unsecured debt go away
Promises an end to debt collection calls and lawsuits
Guarantees of lower monthly payments and access to special government assistance
Refuses to send free information about services without first providing personal and financial information
The FTC warns that another red flag is when a company warns consumers to stop making payments without explaining the consequences, including hidden late fees that could damage credit history.
To remain safe, the FTC recommends that borrowers should contact their lenders to ask what their options are, or reach out to a local credit union or university for credit counseling.