At the end of fiscal year 2011, the federal debt totaled $14.8 trillion.

The debt limit determines when the U.S. Department of Treasury can or cannot borrow money to cover the country’s debts.

Learn more about the federal debt and the debt limit in Federal Debt 101, from the Government Accountability Office.

Minimum Payments on Credit Cards

Video description

What happens when someone makes just the minimum payment on a credit card balance.

Video transcript

Voice over: On the hottest day of the year, Marta’s air conditioner broke. Marta decided it was an emergency. So she went to the store to buy a new air conditioner. Marta didn’t have enough cash, so she used her credit card. The air conditioner cost $300. That evening, her family was cool and happy.

The next month, Marta got her credit card bill for the $300 air conditioner. Marta had it in her budget to pay $15 each month until she finished paying for the air conditioner. $15 was her minimum payment.

Then, every month, Marta sent the minimum payment. But Marta’s balance didn’t go down $15 each month. The credit card company added interest to her balance every month. The annual interest rate on Marta’s credit card was 23 percent. So the credit card company added interest to Marta’s balance every month.

It took Marta more than 2 years to pay for the air conditioner, because she paid only the minimum payment. At the end of 2 years, Marta had paid $382: $300 for the air conditioner and $82 in interest.

Video from the Federal Trade Commission

If you’re in debt, consider getting credit counseling. These services can help you negotiate better terms with your creditors and guide you on budgeting your money.

Find a list of credit counseling agencies approved by the Department of Justice.

Get additional resources on debt and credit. 

It’s easy to get into debt. It’s much harder to get out of it.

Fortunately, there are credit counseling agencies that can help you get your finances in order. They can help you figure out a budget and stick to it while managing your debt and avoiding future financial pitfalls.

However, not all credit counseling agencies are the same. Some offer free or low-cost services while others charge high fees or might not be trustworthy. The following tips will help you choose the right credit counseling agency.

Look for Agencies with a Good Reputation

Most reputable credit counseling agencies are nonprofits that offer free or low-cost services. However, the fact that an agency is a nonprofit does not guarantee that it is affordable or that it has a good reputation. Here are some tips for selecting a credit agency you can trust:

• Ask family members and friends if they can recommend an agency. It’s best to pick one that has been around for several years and has a well-established reputation.
• Use credit agencies or credit counseling services referred by credit unions, banks, universities or military bases.
• Choose a credit agency that’s been approved by the Federal Government.

You can also check out state and local consumer agencies to find out if a credit agency has complaints.

Compare Services and Costs

Once you have a list of agencies you can trust, the next step is to take a closer look at the services and costs they offer so that you can choose the one that best serves your needs. Be careful with credit agencies that charge high fees for services that you can get for free somewhere else.

Some of the most common services offered by credit agencies include:

• Professional, person-to-person assistance with managing your money and debt.
• Help putting together a family budget and sticking to it.
• Free workshops and educational material.

Ask Lots of Questions

Before finally choosing a credit agency, it’s worth writing down a list of questions you might have so that you can avoid surprises such as hidden fees or limited services. Here are some questions to help you pick the right credit agency.

• Are there different fees for different services? Some agencies might charge for initial consultations or a monthly fee. Be careful with agencies that pay their employees more depending on the services you sign up for.
• Will you be signing a contract before getting counseling? If so, be sure to read the contract before signing it.
• Does the agency have the right certifications to provide credit counseling? It’s best to use agencies that have been certified by independent organizations.
• What is the privacy policy of the agency? It’s important that your personal and financial information is protected.

There’s no such thing as a quick way out of debt, but there are realistic steps you can take to get debt under control.