The next big financial issue for America is credit card debt. Coming on top of the sub-prime mortgage mess, credit-card defaults will be the next blow to both consumers and our financial institutions.

Americans now have nearly $1 trillion outstanding on credit cards. That's the amount "riding" as balances carried forward every month, on which interest is charged. Nearly half of those accounts are paying only the minimum monthly payment.

The average interest rate on standard cards is 13.42 percent, according to Bankrate.com. But the more debt you have, the greater the likelihood that your interest rate is 20 percent, or more. At those rates, if you're only making minimum monthly payments, you're getting deeper into debt — not paying it down!

If you or someone you love is caught in this credit card trap, the first step is to face up to the facts. Sit down and make a list of the cards and the balances you owe. For each card, list the interest rate and the minimum monthly payment.

In the past, cardholders turned to home equity loans to pay down credit card debt — an alternative that is no longer readily available amidst the mortgage mess and credit squeeze. So here are some other approaches to dealing with that debt.

Pay it down. This is the most optimistic scenario, but there's a formula that might encourage you to try this route: If you will take the current minimum monthly payment, double that amount, and keep paying that same amount every month, and never charge another penny, you'll pay off the balance in about three years!

Contact the card issuer. This is another optimistic approach — and one not likely to give you much relief. Card issuers won't even begin to negotiate until you've fallen far behind — and by then your credit is ruined. But if you owe bills to a hospital or medical provider, it's certainly worth a try.

Get Credit counseling. If you're overwhelmed, this is the first place to start. At least you'll have a professional advisor helping you decide if repayment is possible. Call Consumer Credit Counseling at (800) 388-2227 to be connected to the nearest local agency office. If you just make an appointment or talk through the process on the telephone, it won't impact your credit report.

You may decide to go through their "debt repayment plan" — where they negotiate with your creditors to take lower payments, and you send CCCS one check a month to be distributed to each of your creditors. This does go on your credit report, but it looks better than a bankruptcy or charge-offs.

Declare bankruptcy. Unfortunately, bankruptcy is no longer the "easy way out," though it may be tempting. If your income is too high, you may no longer wipe out debts through Chapter 7, but instead will be put into a payment plan that might continue to strain your budget.

And bankruptcy does still carry a stigma that could affect your career or business license down the road, as it stays on your credit report for 10 years. For this process, you'll need a bankruptcy attorney.

Weigh debt settlement. This is potentially the most dangerous route to take. You hear debt settlement companies' advertisements on radio and late night television offering to get you out of debt through a "settlement" process. The idea is that you send payments to them instead of your card issuer. Then they'll use their "clout" with card companies, along with your accumulated payments, to negotiate on your behalf. Beware: There have been several indictments of these companies already!

Credit card guru Gerri Detweiler of Credit.com warns: "Many of these new debt settlement companies will take your payments and be gone before the debt is settled — leaving you with ruined credit and even more debt to pay off."

Detweiler acknowledges that professionals can help, because they know when you've received the best offer, and they review terms of the settlement agreement, to make sure the debt doesn't resurface later! Her one recommended company in this field is NewEraDebtSolutions.com

Detweiler also points consumers to ZipDebt.com, where you can download a free, helpful report on the debt settlement process that includes advice on a "do-it-yourself" approach. Or you can pay for their products and coaching to help you through the process.

What can you realistically expect from a debt settlement? "Typically when all is said and done, you will settle all your debt for about 60 cents on the dollar, including fees charged by a debt settlement company," Detweiler says. If that won't solve your problem, and you can't come up with the cash to make the settlement offer, then there's no point in paying the fees.

The sad fact is there are no easy answers. But if you don't face up to your problems, they'll only get worse. Interest will increase the amount you owe. Your balance will be charged off by the card issuer — but sold to a collection agency. They'll hound you for money — within the limits of the Fair Debt Collection Practices Act. If you have assets, they'll sue, and possibly get a judgment against you — potentially allowing them to garnishee wages or put a lien on your home, depending on what your state law allows.

For more information on your rights as a debtor, go to www.ftc.gov/bcp/conline/pubs/credit/fdc.shtm.

Bottom line: Even if you're buried in debt with no hope of repayment, you must face up to it now, starting with credit counseling. The sooner you start, the sooner you'll get this behind you, and the sooner you can move forward having learned an expensive lesson. And that's The Savage Truth.

Terry Savage is a registered investment adviser and is on the board of the Chicago Mercantile Exchange. She appears weekly on WMAQ-Channel 5's 4:30 p.m. newscast, and can be reached at www.terrysavage.com. Her new book, "The Savage Number: How Much Money Do You Make?" has just been published. To find out more about Terry Savage and read her past columns, visit the Creators Syndicate Web page at www.creators.com.

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