Surge in Credit Counseling Demand in 2024 Signals Growing Financial Distress Among U.S. Consumers
In a troubling trend, credit counseling services have seen a significant surge in demand this year, pointing to increasing financial distress among American consumers. The nonprofit organization Money Management International (MMI) recently released a mid-year analysis revealing a 52% rise in new clients during the first half of 2024 compared to the same period last year. These new clients are burdened with an average unsecured debt of $28,000, a 9% increase from 2023.
Kate Bulger, Vice President of Business Development for MMI, shared insights with FOX Business about the alarming rise in both the number of consumers seeking help and the amount of debt they are carrying. “These are folks who were doing fine just a few years ago, but when inflation started to rise, they used their credit cards to bridge the difference between their income and their expenses,” Bulger explained. “As their credit card balances grew, the minimum payment put increasing pressure on their budget. The situation quickly becomes unsustainable.”
MMI’s data highlights the states hardest hit by this growing demand for credit counseling services:
- Washington
Leading the list is Washington State, which experienced a 60% increase in counseling growth. The average unsecured debt of new clients in The Evergreen State also surged by 13% in the first half of the year, reaching $28,459. This dramatic rise underscores the financial struggles faced by residents as they grapple with rising living costs and mounting debt. - Arizona
Arizona ranked second with a 58% increase in credit counseling inquiries. New clients from The Grand Canyon State reported higher unsecured debt, which rose by 11% to $27,431 compared to last year. The data suggests that many Arizonans are finding it increasingly difficult to manage their finances amidst the current economic climate. - Minnesota
Minnesota saw a 56% increase in demand for credit counseling, placing it third on the list. However, it topped all other states in the surge of unsecured debt, which climbed a staggering 25% to an average of more than $30,212 per client. This significant jump reflects the severe financial pressures Minnesotans are facing, leading to a greater reliance on credit counseling services. - New York
The Empire State witnessed a 55% rise in credit counseling demand in the first six months of 2024. While the increase in average unsecured debt for New Yorkers was less pronounced at 10%, the average amount still stood at a hefty $30,414. This indicates that despite a relatively smaller percentage increase, New Yorkers are dealing with some of the highest debt levels in the nation. - Michigan
Rounding out the top five is Michigan, with a 54% growth in credit counseling demand so far this year. The average unsecured debt for new clients in The Great Lakes State climbed by 12% to $27,676. This rise mirrors the broader trend of financial instability affecting consumers across the country.
The surge in demand for credit counseling services highlights a troubling economic reality for many Americans. As inflation continues to squeeze household budgets, more consumers are turning to credit to cover basic expenses, leading to unsustainable debt levels. This growing reliance on credit is not only a financial burden but also a significant source of stress for many families.
The Biden administration faces increasing pressure to address these economic challenges. With homeownership becoming less attainable and credit card debt rising, policymakers must consider comprehensive solutions to support struggling consumers. Potential measures could include expanding access to affordable credit counseling, implementing stronger consumer protection laws, and promoting financial literacy programs to help Americans manage their finances more effectively.
As the nation grapples with these economic challenges, the stories behind the statistics are a stark reminder of the personal toll of financial distress. Families across the country are struggling to make ends meet, and the surge in credit counseling demand is a clear signal that many are on the brink of financial crisis. Addressing these issues will require coordinated efforts from both government and private sectors to ensure that the American dream of financial stability remains within reach for all.
