September 11, 2001
Discipline Helps Consumers Avoid Credit Problems
LINCOLN, Neb. — Put away the plastic. That's the advice of Kathy Prochaska-Cue, a University of Nebraska family economist who has noticed a growing number of consumers getting into credit card debt.
"It's getting to the point where people are maxing out several cards and losing track of what they truly owe," Prochaska-Cue said. "Making minimum payments each month isn't enough."
Two types of consumers seem particularly vulnerable to credit card problems: those who use credit to buy unnecessary extras and those who pay bills on credit when they get into a cash-flow crunch, Prochaska-Cue said.
"It's so easy to pull the plastic out because there's a surreal element to it," she said. "You separate yourself from the reality of paying for the item."
Becoming a disciplined shopper may help an impulsive buyer avoid credit problems, Prochaska-Cue said, but the solution may be more difficult for those who need money to pay their bills.
People with bills past due need to find a way to make them current, she said. Then the consumer can make a plan to avoid that situation in the future, such as getting another job or cutting expenses.
Those who have gotten into severe debt should seek help from a non-profit credit counseling agency, such as Consumer Credit Counseling of Nebraska Inc., Prochaska-Cue said.
Consolidation loans also may be beneficial, but they're not for everyone. Making one payment instead of several is the advantage of a consolidation loan, but the loan also extends the consumer's debt into the future and it takes longer to pay off, she said. Loans usually have interest rates up to 30 percent.
"Research shows there is a high probability that people may get into deeper trouble than before," she said. "The theory behind consolidation loans is to give people breathing room so they can afford basic expenses, but then they feel like they can afford more credit and end up spending more."
Consolidation loans only benefit those who have the discipline to avoid added debt, she said.
Prochaska-Cue said a strict budget can help consumers eliminate or stay out of credit card debt no matter what their financial situation may be.
Consumers should add up the credit they owe, not including mortgages, and track spending patterns to decide what can be cut from their budget.
"There isn't a quick fix once you get into the credit card hole, and you'll have to live at a basic level for awhile," the NU Institute of Agriculture and Natural Resources specialist said.
Prochaska-Cue offered these shopping suggestions to control spending habits:
— Make a shopping list and stick to it.
— Shop alone to avoid buying pressure from kids or spouses.
— Put extra, nonessential items in the shopping cart's child seat. At the end of the shopping trip, choose one item to keep and put the rest back.
"Make your expenses match your income. It sounds very simple, but it's hard for people to do," Prochaska-Cue said.
09/11/01-AA Kathleen Prochaska-Cue - Ph.D.
Family and Consumer Sciences Associate Professor (402) 472-5517
 
Vicki Miller Research Communications Coordinator (402) 472-3813
Department:
Family and Consumer Sciences
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