With recent layoffs and furloughs, millions of credit-card customers can't pay their bills. Asset Management expert Spencer McGowan says this is common and wouldn't happen if people stopped living on credit cards and put 90 days of expenses into the bank.
"Twenty-six million (hopefully only temporarily) unemployed. Everybody has been looking at their budgets and saying, 'Wait a minute, I need to be better prepared.'" Companies and analysts expect delinquencies and charge-offs to soar later this year from people who have been living above their means. McGowan urges people to get working even if it's part time and below your regular pay-grade and get rid of what he calls the worst kind of debt.
Credit Card Debt Growing in U.S. Households
The falling economy and rising unemployment is bringing to light another great example of why we shouldn't live beyond our means using credit cards. Credit card payments are one of the first checks people don't write when money is tight. "You should be whittling down credit card debt first. Then building 90 days worth of cash in your bank for your expenses."
Some banks are offering to waive fees, lower interest charges and even forgive some of their balances. but that's a temporary fix. McGowan says to check the fine print on any credit card offer. McGowan urges you to find part-time work - even below your usual pay-grade - and pay off what he calls the worst kind of debt.