How to Tackle Credit Card Debt Before It Takes Over

Credit card debt can feel overwhelming, but it does not have to shape your future. In this conversation, Michael McCauliffe, president of Family Credit Management, explains practical ways to lower interest costs, reduce monthly payments, and create a realistic plan for becoming debt-free.

Jeffrey Snyder, Broadcast Retirement Network

Michael, it’s great to have you with us this morning. Thanks for joining the program.

Michael McCauliffe, President, Family Credit Management

Thanks for having me.

Jeffrey Snyder, Broadcast Retirement Network

We appreciate you coming on and sharing your perspective. This is clearly a subject you care deeply about. I want to begin with a basic question to set the stage for viewers: how serious is the credit card debt problem for American households?

Affordability remains a major challenge, and many people are relying more heavily on credit cards to cover everyday spending.

Michael McCauliffe, President, Family Credit Management

The problem is huge, and it is at record levels. One of the biggest issues is that many people do not keep track of how much they owe on their cards.

Inflation has hit hard. If someone puts $300 or $400 a month on credit cards, that can turn into $4,000 after 10 months.

People often do not realize how quickly it adds up.

Jeffrey Snyder, Broadcast Retirement Network

That is a significant amount of money. So is this debt mainly a matter of individual spending behavior, or is it also tied to the fact that everything costs more now, from groceries to gas to energy?

Michael McCauliffe, President, Family Credit Management

Both are part of it. Rising prices are making it harder for people to see how fast their balances are climbing. On top of that, more consumers are turning to buy now, pay later services.

Those plans can look harmless at first, because $30 a month seems manageable. But once someone has three of them, that becomes $100 a month.

It snowballs quickly.

Jeffrey Snyder, Broadcast Retirement Network

Many people watching may have taken on debt for understandable reasons, as we just discussed. How hard is it to pay that debt down?

It seems like making only minimum payments would allow high credit card interest rates to keep the balance growing.

Michael McCauliffe, President, Family Credit Management

That is why I tell people to start somewhere. One of the hardest parts is that if you keep using the cards, you are not really tracking the balances. You do not see the debt going up.

You may be making payments each month, but if you are adding more than you are paying, the interest compounds and makes the situation worse.

Jeffrey Snyder, Broadcast Retirement Network

Let’s talk about getting out of debt. Should people simply stop using their credit cards altogether?

What if they still need access to them? We are heading into the holiday season, after all. How do people begin reining in that behavior so they can start paying balances down?

Michael McCauliffe, President, Family Credit Management

We do not recommend closing the cards for a few different reasons, but we do recommend not using them. If you cannot pay the card off every month, do everything possible to avoid using any of them.

Put every extra dollar you can toward the highest-interest card and slowly chip away at the debt.

Jeffrey Snyder, Broadcast Retirement Network

That sounds right, and probably like common sense. But people are creatures of habit, and they tend to reach for a card or tap to pay without thinking. How do you change that behavior?

Michael McCauliffe, President, Family Credit Management

We run a nonprofit debt management program, and one of the key things we do is behavior modification. We try to teach people how to live without credit cards.

Credit cards are convenient and easy to use, so we also suggest keeping one small card and paying it off every month, using it only for things like gasoline, groceries, and other small necessities.

Jeffrey Snyder, Broadcast Retirement Network

I know you help clients negotiate lower fees and payments. I see a lot of commercials for debt management services. Is there a difference between a for-profit debt management company and a nonprofit organization like yours?

Michael McCauliffe, President, Family Credit Management

Yes, and the lines between these firms can get blurred. Debt settlement is a newer approach and is only appropriate for a small percentage of people.

For some clients it can be the right fit, but there are serious risks. If you do not pay your creditors, they still want to be repaid.

We are seeing more lawsuits, and creditors are becoming more aggressive legally than they were in the past. Consumers can pursue this route, but they need to be very careful.

Jeffrey Snyder, Broadcast Retirement Network

What happens if someone does not pay off credit card debt and lets it continue? We know minimum payments can keep the balance growing because of interest rates that are often in the 20% range. What other consequences can come with that? Does it affect other parts of your financial life?

Michael McCauliffe, President, Family Credit Management

Yes. If you are unable to make your credit card payments, your credit score matters for much more than borrowing money. Employers use it. Utility companies use it. Rental housing uses it.

Your score is important, and it can fall quickly. Unfortunately, it usually rises much more slowly.

Jeffrey Snyder, Broadcast Retirement Network

So to rebuild credit, the first step is usually making larger payments or maybe consolidating cards, right? That seems like one of the things you focus on: bringing the debt together and negotiating a lower rate for the customer.

Michael McCauliffe, President, Family Credit Management

With nonprofit debt management and credit counseling, we go to the credit card companies and explain that the consumer wants to get out of debt, avoid default, stay current, and avoid bankruptcy.

We ask them to help. Most major creditors are very cooperative. We are often able to get the average interest rate down into the single digits.

Most of our clients are out of debt in five years or less. In many cases, accounts are brought current, fees stop, and it becomes a strong option for people who also want to learn how to live without credit cards.

Jeffrey Snyder, Broadcast Retirement Network

Are you seeing companies take action on unsecured debt? Since there is no collateral behind a credit card, I would think the consequences are mainly a lower credit score or a reduced credit limit. Can they actually take the card away from you if you do not pay?

Michael McCauliffe, President, Family Credit Management

Yes. I used to be a collector, and that is one of the tools collectors can use. They may tell you that if you do not bring the account current, they will close the card or reduce your credit limit.

The final step is a lawsuit, and that does happen. As I mentioned, litigation involving unsecured debt is increasing.

Jeffrey Snyder, Broadcast Retirement Network

That brings up another issue, since lawsuits are becoming more common. If a credit card company sues someone because payments were not made or the debt became too large, can they garnish wages? Could they reach Social Security or retirement assets?

Michael McCauliffe, President, Family Credit Management

Over the 30 years I have been doing this, we have tried to understand when creditors sue and when they do not. The clearest pattern is that they sue only if they believe they can collect, because they will not spend money on attorneys if they think there is nothing to recover.

If someone is working and the creditor thinks collection is likely, they may file suit, obtain a judgment, and then move on to garnishment.

Once that happens, the only way I know to stop it is bankruptcy.

Jeffrey Snyder, Broadcast Retirement Network

So bankruptcy would be the next step, but that comes with serious consequences. It is not a cure-all. People often talk about Chapter 7, Chapter 11, and Chapter 13 bankruptcy, but there are still drawbacks. If someone declares personal bankruptcy, does that affect their ability to get credit or a loan later on?

Michael McCauliffe, President, Family Credit Management

Absolutely. Bankruptcy laws were tightened roughly two decades ago, and filing is much harder now. Many clients say they will just file bankruptcy, but after meeting with an attorney and going through the means test, they realize it is not a good option.

They may end up in Chapter 13 and be required to make repayments. At that point, they decide they do not want to repay the debt and file bankruptcy at the same time.

Then they are back to trying to work something out.

Jeffrey Snyder, Broadcast Retirement Network

Do you recommend that people try calling their credit card company on their own if they cannot make payments? You obviously help clients, and your nonprofit may have more leverage than a single consumer, but is it still worth starting that conversation? Since creditors want repayment, they may be willing to listen.

Michael McCauliffe, President, Family Credit Management

Definitely. Most credit card companies will try to work out something with people individually. The challenge is that sometimes someone makes a deal on their own and then gets locked into it, when we might have been able to get a better result.

Sometimes people can get the same deal we can. Sometimes they cannot. But it is worth talking to someone who understands the process.

I always say that when you are dealing with medical, legal, or financial problems, it helps to find an expert. And it does not cost anything to call and ask questions.

Jeffrey Snyder, Broadcast Retirement Network

That is a good point. I do not want to sound grim, but what happens if someone dies while carrying a large amount of credit card debt? Does the debt disappear, or does it become part of the estate and affect the people who inherit assets?

Michael McCauliffe, President, Family Credit Management

Generally, unless you are in a community property state such as Wisconsin or California, a spouse is not responsible for the debt if they did not sign for it.

Jeffrey Snyder, Broadcast Retirement Network

Okay.

Michael McCauliffe, President, Family Credit Management

If there is probate and an estate, the estate is usually responsible for repayment. But children are not responsible for the debt. They do not have to pay it with their own money, even though many people think they do.

Jeffrey Snyder, Broadcast Retirement Network

And I do not mean to argue against your work helping people, but do you think there will ever be a point where the country collectively makes progress on this debt problem? Or will we keep seeing the total grow, with different people carrying it but the overall amount staying around the same level or increasing?

Michael McCauliffe, President, Family Credit Management

I do not see any signs that it will stop growing. The holidays are coming up, and many people tell us they want to start our program, but they do not want to close their cards until after the holidays. We tell them that waiting only makes the problem worse.

It is tough, but we think it is better to start now.

Jeffrey Snyder, Broadcast Retirement Network

It is a lot like trying to start a diet after the holidays. That is why January is such a big month for gym memberships: people wait until after the festivities to start trimming down. Michael, we will have to leave it there.

Great conversation. Keep up the good work, and we look forward to having you back soon.

Michael McCauliffe, President, Family Credit Management

I love talking about it, Jeff. Thank you.

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