You are to assume the role of a credit counselor. A client is seeking advice on personal finances.
The client, after paying monthly needed household bills, has $500.00 remaining for payment on credit cards and for miscellaneous expenses. The following is a snapshot of the client’s three credit cards:
Credit card 1 – Major credit card, limit of $10,000 with 21% interest rate
- The client’s current balance is $9,000 with a $200.00 minimum payment due.
- The client pays the minimum amount due each month
Credit card 2 – Retail store credit card, limit of $5,000 with 25% interest rate
- The client’s current balance is $4,000 with a $100.00 minimum payment due
The client pays the minimum amount due each month
Credit card 3 – Retail store credit card, limit of $2,500 with 22% interest rate
- The client’s current balance is $2,000 with a $50.00 minimum payment due
- The client pays $100.00 each month
The client after paying the monthly credit card bills, rarely has enough money left over for miscellaneous expenses. As a result, the client charges the miscellaneous expenses on a credit card. Oftentimes the extra charges end up being more than the payment made.
The client has asked for your advice on credit card debt. Specifically, the client wants to understand excessive debt, possible consequences, and actions to take to manage or reduce the debt.
