Nearly three-fourths of Americans (73%) unaware of key benefit provided by nonprofit credit card debt management plans
More than half of Americans who have been in credit card debt (51%) have used some form of credit card debt relief, according to a recent online survey conducted by The Harris Poll on behalf of Money Management International (MMI). Among them, the most common form of relief was
- balance transfer to another credit account (36%), followed by
- help from friends or family (30%) and
- debt consolidation loans (27%).
Meanwhile, just 15% have employed a debt management plan (DMP) through a nonprofit credit counseling agency, like MMI.
The findings highlight a lack of awareness and widespread misunderstanding about the benefits of DMPs as an alternative to other debt relief solutions. Nearly two-thirds of Americans (62%) do not know that a DMP allows credit card debt obligations to be combined into a single payment, paid monthly and distributed to all creditors. Nearly three-quarters of Americans (73%) do not know that interest rates are lowered on debts included in a DMP.
The DMP works much like a consolidation loan, but has the advantages of no credit score requirement and the option to cancel at any time. The DMP offers a competitive interest rate, particularly valuable for consumers unable to secure a prime-rate loan – or denied completely – due to credit blemishes. Loan applicants with credit scores below 630 can expect an annual percentage rate (APR) of 27.2%, according to a Nerdwallet lender survey, but the average rate on a DMP is just 7.82%, according to a 2018 Nerdwallet review of MMI. On average, DMP clients at MMI repay $18,676 in 52 months, shaving years off their repayment and saving thousands in interest.
While credit card balance transfers may provide an attractive promotional rate, they carry a shorter term – 6 to 18 months – before reverting to the standard APR. The best balance transfer offers require a prime credit score and usually include a balance transfer fee. Counselors at MMI note that some consumers habitually cycle from one card to the next, failing to pay down the debt and often adding new charges to the accounts.
It’s difficult to see those challenged by unmanageable debt overlook a proven solution simply because they are unaware of its existence or unfamiliar with its benefits,” said Jim Triggs, Senior Vice-President of Counseling at MMI. “Consumers are deciding how to address their debt without fully understanding all their options, but can make an informed decision by creating a plan with the help of our skilled counselors.
This survey was conducted online within the United States by The Harris Poll on behalf of Money Management International from July 10-12, 2018 among 2,012 U.S. adults ages 18 and older, among whom 1,501 have been in credit card debt. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated.