Blog

As consumers approach and then pass middle age, they are less likely to know how to deal with credit card debt, a study has found.

According to a new study from Boston College’s Center for Retirement Research,consumers make the best decisions when it comes to paying off their credit card debt with a balance transfer from one card to another when they are between the ages of 35 and 44.

The study surveyed consumers in five age groups – 18 to 24, 25 to 34, 35 to 44, 45 to 64 and over 65 – and asked them how they would reduce credit card debt that they had just transferred from one credit card to another with a low introductory rate. About a third of all respondents immediately provided the best answer, which was to make new purchases on the old card while paying off the debt on the new card.

The age group with the most "immediate eureka moments" was that of the 35- to 44-year-olds, who responded correctly over 40 percent of the time. The next-best group was 25 to 34, who were barely under 40 percent. The group with the fewest immediate correct responses was "over 65," which came in just over 20 percent.

The report said that the corresponding data for those who had "no eureka" exhibited the opposite pattern, with the youngest and oldest age groups exhibiting higher percentages, and troughing with the 35- to 44-year-olds. This, the report said, indicates "that the greatest frequency of confusion occurs among younger and older adults." In all, a little more than a third of all respondents never arrived at the correct conclusion.

The study found that the remaining one-third of respondents come to the correct decision after one or more billing cycles, when they discover they are paying "surprisingly high" interest rates. After these consumers had their "eureka moment," they always changed strategies to the correct one rather than continue on making purchases with their new card.

Consumers should also be aware that credit card issuers often charge a fee for a balance transfer, meaning that consumers should do some number crunching before making such a transaction. Occasionally, the amount they pay for their fee outweighs any subsequent payments toward interest they would have made.

The number of Americans who were forced to file for bankruptcy protection rose in July for the first time in months, which kicked off the second half of the year on a down note.

According to the National BankruptcyResearch Center, there were 137,698 filings across the country in the July. That number is a nine percent increase from the total posted in June, as well as over the same month last year. Further, if the number of consumers who seek protection from their creditors continues on its current pace, the nationwide total of filings will top 1.6 million, a significant increase from the 1.4 million last year. At the time, that was the most bankruptcy petitions filed since the country revamped its laws in 2005, which made it more difficult for consumers to do away with their debt.

The Wall Street Journal’s report on the figures said that one of the largest contributing factors to the increase in bankruptcies is that credit issuers have tightened restrictions on the type of consumers they will lend to, and as a result more consumers had trouble paying debts.

"They can no longer borrow to stave off the day of reckoning," Robert Lawless, a University of Illinois law professor, told the newspaper.

The report said that this renewed vigor with which consumers are filing for bankruptcy has cast serious doubt on whether the 2005 law changes have been effective, as filings are once again returning to the levels seen in the early and mid-2000s. However, it mentions that the number of filings could decline slightly in the next few years if consumers who are shut off from additional lines of credit can’t amass more debt.

The report also noted that many states in the Southern U.S. have unusually high rates of filing. Ronald Mann, a Columbia University law professor, found that six of the 10 counties across the country with the highest bankruptcy rates are located in suburban Atlanta. Filings in Hawaii, California, Arizona and Utah have all climbed more than 30 percent over the rates seen a year ago.

The NRBC report also said that 75 percent of all bankruptcy filings in July were under Chapter 7, which allows for liquidation, rather than Chapter 13, which requires consumers to pay back a portion of their debt over a period of three to five years.

A new study has found that the national recession has changed the way consumers obtain and pay off their credit card debt considerably over the last three years.

According to a new report from the credit monitoring bureau Experian, the nationwide number of new credit card accounts that have been opened in the last three years declined 26 percent. In addition, the way consumers have used their lines of credit has also changed dramatically.

"This implies that many American consumers are relying less on cards and potentially trying to pay down debt," said Michele Raneri, Experian’s senior director of analytics.

The study also looked at how consumers in the nation’s 20 largest metropolitan areas used their credit, and found that New Yorkers carry the most cards – 3.77 on average – of anyone in the country. Pittsburgh residents, meanwhile, came in second, with 3.6 per person.

Many consumers may have found it easier to reduce their total debt as a result of the Credit Card Accountability, Responsibility and Disclosure Act, which was designed to help consumers manage their credit more wisely.