Countless people across America are burdened by credit card debt defaulting to all time high interest rates. These default rates are as high as 30%, but average 26.87%. Credit unions do not have default rates. The American Debt Relief Challenge was founded to specifically measure the savings for the millions of Americans burdened by these default rates, as they are returned to a traditional rate by transferring their balance to a not-for-profit credit union.
How do we calculate the savings?
1. First the credit union enters the amount of the consumer's credit card debt and the ADR challenge calculates the amortized payoff using the bank rake, when it is available and when it is not, the average bank default rate. "This best represents the rate that the American Debt Relief Challenge is saving consumers from," according to Bob Manning, PhD. author of Credit Card Nation.
2. ADR then calculates the same amortized payoff of consumer credit card debt using traditional rate the consumer was returned to by transferring the balance to the credit union.
3. The difference between paying off the debt at their previous high interest default rate and the debt returned to a traditional rate at the credit union is how we calculate the consumer savings.
Are consumers safe from default rates at credit unions?
Yes, and if you find a credit union that has a default rate let us know. We'll shame them. Although policies vary from credit union to credit union, it is important to note that credit unions, as a standard practice, do not have a "default rate." Default rates are a "profit-maximizing" practice. Credit Unions are not for profit, owned by peope that bank at the credit union. You can see how consumers are saving so much money when the average credit union credit card rate is 13.83% and they don't punish consumers with default rates. This is dramatically different from the average mega bank's default rate of 26.8%! That's because not-for-profit credit unions exist to serve their member-owners, not maximize their profits.
.gif)
