Taking Stock: Debt Check-In

This blog article was authored by Jesse Campbell, Content Manager at Money Management International (MMI), our SaverPerks partner organization.

A new year is a new chance to reset, refocus, and start making progress on your financial goals. Is reducing debt on your radar for 2025? There’s a good chance it should be.

On average, American credit card holders with unpaid balances have over $7,000 in credit card debt. The total credit card balance for all Americans was $1.1 trillion in the third quarter of 2024. If you don’t have any debt, count yourself lucky. If you do have debt, the beginning of the year is the perfect time to assess the situation and decide on a plan of action for the year ahead.

With that in mind, here’s how to complete a debt check-in and get your year off to a positive start.

Understand Your Debt

First things first: what debts do you currently have? That may seem easy enough to answer if you’re checking your statements each month, but debt has a habit of getting away from us. 

You can pull a copy of your credit report to get a fuller picture of your debt situation. Visit annualcreditreport.com to request a copy of your credit report from one of the three major credit reporting agencies (TransUnion, Equifax, and Experian). Your credit report will show details from your current credit cards, real estate, and installment loans. 

What are You Looking for in Your Credit Report?

For the purposes of your debt check-in, take note of the status, balance, monthly payment, credit limit, and payment history.

• Status tells you whether an account is open or closed and if it’s current or past due.
• Balance tells you how much you owe on that particular account (i.e., your debt) at the time of the last status update.
• Monthly payments are the minimum amount you must pay each month (assuming you have a balance).
• Credit limit is the maximum amount of credit available on that particular account.
• Payment history shows the account status (paid or delinquent) for each month of the last seven years (84 months).

As you review, ask yourself these questions:

•  Are all of your accounts in good standing? 
• Can you afford the minimum payments for each account? 
• Could you potentially pay more to accelerate your debt repayment? 
• How much of your available credit limit are you using?

All of these data points tell an important story about your debt and whether or not it comfortably fits into your budget.

Assess Your Current Financial Health

Of course, your debts only tell some of the story when it comes to your finances. The other big factors are your income (what you earn) and your expenses (what you spend).

To assess your financial health, ask yourself the following questions:

• At the end of each month, do I have money left over for saving or other goals? 
• Am I routinely using credit to cover my monthly expenses?
• Are my debt payments making it difficult to manage the rest of my budget?
• Does thinking about money make me stressed out?

Having money left over after your expenses each month is also called having financial slack, and financial slack allows you to build savings. If your debt payments and expenses are eating up all of your income, that may be a sign your financial situation needs attention. If your debts are increasing because you can’t afford your current expenses, that’s an even bigger red flag.

But you don’t need to just rely on the numbers. How do you feel about your financial situation? If you’re stressed or simply unsatisfied, that’s enough of a reason to make changes in the year ahead.

Options for Managing and Repaying Debt

If your debt is manageable and you’re feeling good about your finances, you may not need to change anything. But if you’re falling behind on your payments, your debts are rising, or you’re starting to feel overwhelmed, now’s the time to start considering your options.

Debt Consolidation Loan

If your debt payments and associated interest charges are the problem, you may benefit from a debt consolidation loan. This would allow you to roll your credit card debt into a single loan with a lower interest rate and a single, affordable payment.

Debt consolidation loans can create simplicity and focus in an otherwise chaotic debt situation, but they do have drawbacks. To get a good interest rate, you’ll need good credit. If you’ve already started missing payments, you may have a hard time qualifying for a loan with good terms.

Also, like any loan, there are typically fees associated with opening the loan, so make sure that the ultimate savings outweigh any upfront costs.

Debt Management Plan (DMP)

A debt management plan is similar to debt consolidation but without the loan. You make a single payment to the plan provider, and they pay creditors on your behalf. 

Debt management plans typically come with lower interest rates, waived fees, and potentially even lower payments. At nonprofit Money Management International (MMI), for example, the average interest rate for accounts on a DMP is just 7.08%. The lower interest rates create massive savings in interest charges over the life of the program, which is typically completed in about four years.

Because it’s not a loan, there’s no credit requirement for a DMP, making it a great alternative for consumers who don’t qualify or wouldn’t benefit from a debt consolidation loan.

Debt Settlement

Debt settlement (sometimes called debt resolution) is where you negotiate a partial repayment with your creditors. Because you aren’t paying the full amount, the total costs are often much lower than the other available options.

Settlement is typically only recommended for consumers who are already severely behind on their debt payments. Creditors usually won’t negotiate a settlement on an account in good standing, so whether your debts are already delinquent or you intentionally withhold payment to negotiate a settlement, the impact on your credit will be incredibly negative.

That said, if you’re struggling to manage your debts, your credit score may not be your priority, making settlement a reasonable option for clearing away the debt and giving yourself a clean slate to start over.

Do your research and work with a reputable debt settlement company (or negotiate directly with your creditors). 

Be Careful with Short-Term Credit Products to “Solve” Cash Flow Problems

When you are in debt, it can be tempting to reach for a quick solution to make a payment. Many online companies will offer you short-term loans like Buy Now, Pay Later or cash advances. These offers are very common, and you may see ads for them as you browse the internet. While they can sometimes help out in a pinch, these fintech short term loans can sneakily increase your debt or disrupt your finances as you end up with less money the following month.

SaverLife member Sarah said that cash advance products helped her temporarily, but also set up a debt cycle that made it hard to stop using the products for more loans. She said it was especially difficult if a paycheck came in that was smaller than usual. 

“Sometimes you can wake up on payday morning and realize that you never even saw your paycheck,” Sarah said.  “Like, it was there temporarily, and then every bit of the paycheck got ripped out by various little apps.”

Fortunately, Sarah’s experience taught her to be cautious with these types of products in order to avoid the debt cycle.

Instead of seeking a quick fix, consider the longer-term solutions mentioned here, such as debt consolidation, a debt management plan, or debt settlement.

Focus on Progress and Positivity

Whatever path you choose, be kind to yourself throughout the process. Many people get into debt at times, for many different reasons. SaverLife member Terry first got into debt during a divorce, when he found himself having to rely on credit cards. Other people sometimes face medical expenses completely beyond their control. Don’t blame yourself for whatever led to your debt situation – instead, look forward to a better financial future when you will feel calmer and happier without debt. 

Change is hard! Committing yourself to repaying debt is a big step, so be sure to set achievable goals and reward yourself throughout the process.

Sometimes setbacks will happen. That’s okay. Just pick yourself up and keep moving forward. 

Action Item: If you need help getting started, or support throughout the process, SaverPerks partner MMI offers free financial counseling 24/7, online and over the phone. Talk to an expert and get tailored advice for your unique situation.