Yo-yo debtors can land in financial trouble

Posted at 5:45 PM, Oct 20, 2017

You’ve heard of yo-yo dieters…people who lose weight, just to gain it back, then start the dieting cycle all over again.  Experts are now warning that the same type of up and down cycles are happening with too many people’s credit cards, and it’s resulting in financial chaos.

That’s what happened to Charlese Antoinette. She is careful how she uses a credit card these days, but that wasn’t always the case.  “I would just like buy whatever I want and charge it up,” says Charlese.

She’d push her plastic to the limit.  But the biggest problem?  Once she’d pay the cards off, she’d just fil them up again.  Experts have a term for this.  It’s called “yo-yo debtor.”   Millennial debt expert Tonya Rapley explains, “A yo-yo debtor is someone who treats their debt like a yo-yo they pay it off and reel it back in, then they release it and they get back into debt.”

And, while financial experts say yo-yo debt impacts all ages, a recent survey shows nearly a third of millennials have maxed out a credit card.  Experts say some of the younger set just don’t understand how credit works. “That doesn’t mean that they’re not intelligent or not financially literate,” says Tonya. “They just might not know that it’s not a healthy practice to be a part of.”

Research also reveals that 43% of millennials have sub-prime credit, worse than other age group.  Experts say the problem is often spending without planning. According to credit counselor Mark Higgins, “It’s typically when there is no budget in place.  They’re running a budget deficit over the course of time, which, in turn, balloons the credit card debt up.”

Tips to stop the yo-yo’ing: Budget monthly; know your credit limit, pay more than the minimum, and increase savings-- even while you are in debt. Charlese says she reached her limit when she didn’t have enough credit to rent an apartment.  She got a credit counselor, paid off all but one card and boosted her credit score 200 points – all in less than a year. 

“I’m really glad that I figured out how to be more financially responsible,” Charlese says. “I’m like OK.  I got it.”

If you or someone you know is having credit problems there are a number of low and no-cost credit counselors available.  Find out more atwww.USA.Gov/Debt.