Editor's Note: This article is part of a popular Q & A format series in which we interview experts and industry professionals that have made significant contributions to the credit card industry.
Scott Crawford is the CEO of DebtGoal.com. From the beginning of his career in economics, he watched Americans' savings go down and debt-load go up and was fascinated by this trend. Eventually, Scott went to work for a large credit card issuing agency and was charged with doing research to learn customer needs. The results of this research were used to design new products.
One consumer theme heard repeatedly was the request for help to get out of debt. Obviously the idea could not be sold to the credit card company, so he decided to do it on his own. Scott joined forces with technology and business-development experts to create a new company that would focus on helping consumers attain their financial goals. The end result was GoalSpring and its flagship product DebtGoal.com. He explained how Debtgoal.com can help those with debt troubles.
Mike: It looks like your site offers a debt acceleration plan. Can you describe how this works?
Scott: Debt acceleration plans are pretty simple conceptually. Ideally, you start with a constant amount you want to apply to debt each month. You make minimum payments on all accounts except the highest interest account, which gets the remainder. As you make progress paying down other credit cards, the minimums on these accounts come down and you free up more to apply to the highest-interest account. Using this technique, users can pay off credit card debt in approximately 2.5 years versus 14 or more years if they were to make minimum payments only.
Although it sounds easy, this can be daunting for a lot of people. To make it work, you need to start with a committed amount each month and adjust for any credit card spending. For many people with multiple debt accounts, the ongoing organization requirements are more than they are comfortable with. GoalSpring has created a system which manages it for them, putting their information in one place and simplifying the management process.
Mike: Do you offer ideas on determining the accelerated amount and do you have a suggested amount to apply to acceleration?
Scott: We believe that our users are more likely to have long-term success reducing their debt if they find a monthly commitment amount that works for them. So rather than push them to set a really aggressive initial target that will prove unsustainable after a few months, we start with the sum of the user's current minimum payments and let them go up from there. Remember that by starting with minimum payments and holding this amount constant, most users can pay off credit card debt in 3 years versus 14 years. So the important thing is to find an amount greater than minimum payments and stick with it. Adding in mortgage or student debt will leverage this payment acceleration to pay these debts off efficiently as well.
Throughout the process, we show users opportunities to evaluate their spending structure and determine if they want to free up cash that they can apply to debt by increasing their monthly commitment. For instance, we encourage users to evaluate whether they can reduce their mobile phone or cable bills and how much that would save them in interest expenses over the life of their debt. If they want to take that action, they can log the action in the tool and increase their monthly commitment amount. To help users quickly evaluate the potential impact of these actions, we show how other users have rated the actions and how much it saved them in interest.
Mike: Do you offer alternative debt solutions?
Scott: We're in the process of building out this capability now. Since we have good insight into users' debt structure, we can show them the impact of having a different debt structure. We are working to build out a catalog of products that we can present to users that will show them the impact on their debt-free date and total interest expense. Using our tool, users can take advantage of these offers to realize the savings and reflect them in their plan. Even though they lower their interest costs, we'll encourage them to keep their payments the same so that more money can be channeled toward debt repayment.
Mike: Can you describe some of the tools you incorporate at your site?
- Our Debt-Health estimator helps users understand their debt health and actions they can take to improve it.
- The Rate-Negotiator helps users negotiate lower rates with credit card issuers by showing them the average reduction that other users have been able to get for each of the major credit card issuers.
- Our community allows users to interact and share debt tips that will help to get out of debt quicker.
- Our debt reduction tools help users analyze different debt-reduction strategies: Should you take out a 401(k) loan to pay off credit card debt? Should you apply savings to debt? Should you take out a home equity line of credit to pay off credit card debt?
Mike: Is there anything else you would like to add?
Scott: Paying off debt is the number one New Year's resolution for 2009. According to Franklin Covey, 56 percent of Americans set a goal to reduce debt this year. Of this number of people, 65 percent will never actually create any sort of a concrete plan to attain their goal. DebtGoal is there to help. We make planning easy.