AVOIDING COURT: COMPANY HELPS PEOPLE GET OUT OF CREDIT JAM

Back when Joe Jones was in college, credit card companies generously sent him pieces of plastic that gave him the power to buy now and pay later.

All he had to do was fill out an application. "I felt like `Wow, I must be special'," he says.

Now it's much later, but Jones is still paying.

Jones, who's using a fictitious name in this story, is now a 29-year-old white-collar worker with a sick credit rating and a debilitating debt.

He knows he used his credit cards unwisely in the past. "I could have $25 in cash in my pocket and still I would get gas with a credit card,," he recalls.

He soon discovered that one phone call to the credit card company could magically increase his spending limit.

He became a college student with a $3,600 credit limit.

"It was convenience that turned into want," Jones says.

With the help of his cards, Jones began turning into Santa Claus every Christmas. "I tried to play a big shot," he says. "I would come in with the biggest gift. It was really a game."

The game required him to spend the rest of the year paying for his Christmas largess.

Eventually, the damages amounted to $6,500 owed on Mastercard, Visa and gasoline credit cards. When he and his wife had trouble making the minimum payments on their credit cards, they began skipping payments.

Until about a year ago, he was spending way too much time hanging up on people at collection agencies. He considered filing for bankruptcy.

Then, a year ago, Jones called William C. Holly, branch manager of the Consumer Credit Counseling Service at 1606 Independence St.

Holly's agency offers two types of counseling: financial advice, and a debt management program.

The non-profit service is in the business of helping people get out of credit jail.

Those who want out will have to pass GO, in that they agree to a three-year moratorium on new debt. That's how long it will take them to repay what they owe.

Almost all clients also are required to perform the most painful penance of all cut up their credit cards.

But they won't have to pay $200, or anything for that matter. The service is free, paid for by the creditors.

Credit cards are the reason 80-85 percent of Holly's clients are in trouble. Most of the rest have gotten behind on their bills because of unemployment. Sometimes hospitalization not covered by medical insurance is the cause of over-extended indebtedness.

Holly says credit card abuse is not a matter of greed. "It's a problem of the mode of management people are in."

His is a strict interpretation of healthy credit card use: for emergencies such as an unexpected plane ticket or for convenience only if the balance can be paid within a month.

Holly points out that any unpaid balance on a credit card with a 20 percent interest rate doubles in 3.8 years.

Unfortunately, many people are naive or ignorant about the unavoidable arithmetic truth.

"A lot of people here are used to spending more than they're making," he says.

Holly will contact creditors to see if there is any way to reduce the debt initially. Some will cut back late charges or reduce the interest rate on the outstanding debt.

Then people in Jones' situation will begin paying into a trust account which amalgamates all their debt.

Living without credit cards amounts to a lifestyle change to people accustomed to spending beyond their means.

"I felt like it was going to be a dramatic change and I wouldn't be able to handle it," Jones says.

His wife also was required to change her spending habits. "I don't have anything if one does (budget) and one doesn't," Holly says.

But having learned how to budget the money he does have, Jones has been paying $233 per month on his debt for the past year and can clear it in another two years.

Afterward, Holly hopes Jones will continue paying into a savings account of his own, with the goal of saving the down payment for the house Jones eventually hopes to buy.

"The whole focus of the thing is to get on a cash basis," Holly says.

The service is confidential. No addresses or phone numbers are given to creditors, Holly says.

He does tell creditors when they can expect to see some of their money. Sometimes, when being asked to reduce debt, they will ask to see data on the client's indebtedness. Holly provides it with the client's permission.

Holly's Cape Girardeau office is part of a chain of nine agencies run by Consumer Credit Counseling Service of St. Louis, Inc. The chain is part of a national non-profit organization which uses the same name.

It has one reason for being, Holly says. "The purpose of this business is to try to circumvent bankruptcy.

"...More and more (creditors) are viewing these guys as in a bad mode of operation. They still want to do business with them."

Somewhat ruefully, Jones concedes that his experience with credit cards has been a lesson in maturity.

"It was due to ignorance back then," he says. "I am paying for it as an adult."