Content area
Full Text
The present study examined the relationships among credit counseling, financial behaviors, financial stressor events, perceived financial well-being, and health. Data were collected from clients of a large credit counseling organization on two occasions, once in June 2000 and again in January 2002. Path analysis was employed to assess relationships among the variables. Credit counseling and debt management program directly affect financial stressor events in a helpful way and indirectly affect perceived financial well-being and health of the participants after 18 months. Results provide some evidence of the effectiveness of credit counseling in improving financial and health variables.
Keywords: Credit counseling, financial well-being, stress
Introduction
American consumers are falling behind on credit card bills. On average, U.S. households had $8,940 in credit card debt in 2002, compared with $3,275 ten years ago. Federal Reserve statistics show that in January 2003 consumer debt was over $1.7 trillion and revolving debt accounted for $711 billion of this amount. As consumer debts rise, more consumers find difficulty repaying. A recent poll by the Cambridge Consumer Credit Index found that about 40% of credit card holders are paying only the minimum payment.
Seeking credit counseling is a popular strategy for those with credit problems. Oftentimes it is a strategy taken to avoid bankruptcy; for some it is a step taken prior to bankruptcy. Providing assistance to consumers with financial troubles has become a fast growing industry. Consumers can obtain counseling and advice about their money matters either in a faceto- face counseling session or via the telephone.
The New York Times reports that an estimated 9 million consumers sought help from credit counseling services in 2002 (Bayot, 2003). Taking data from a variety of sources, Garman (2003) asserts that there are 30 million consumers (including those who contact credit counseling agencies) who are overly indebted and/or distressed about their personal finances.
A debt management program (DMP) is one of the services offered by credit counseling agencies. It gives individuals a plan for paying offtheir liabilities by consolidating their unsecured debts into one monthly payment. The debtors make the payment to the counseling agency, which in turn disburses payments to creditors. Clients who enroll in the agencies' payment plans may benefit because the agencies can negotiate lower interest rates, smaller...
