Record U.S. household debt highlights importance of choosing lenders carefully, BBB says

SEATTLE — Americans now owe more money than ever before, with total U.S. household debt reaching a record $18.8 trillion, according to a new report from the Federal Reserve Bank of New York.

Local Better Business Bureau (BBB) data suggests that where consumers choose to borrow money can play a major role in whether they successfully manage debt or face financial trouble.

“In the past year, Washington residents filed more than 400 complaints plus nearly 400 negative reviews involving banks, credit unions, credit card companies, and related financial services,” BBB spokesperson Cameron Nakashima said.

Many of the complaints involve issues that led to late or missed payments, Nakashima said.

Problems with lenders can affect nearly every part of a consumer’s financial life, including paychecks, savings, credit scores, and the ability to buy a home or car.

The most common complaints center on communication and transparency, according to the BBB.

“All businesses make honest mistakes sometimes, but when customer service is hard to reach, or problems take weeks to resolve, those issues can snowball,” Nakashima said. “That can lead to overdraft fees, damaged credit or collection disputes that might have been avoided with clearer communication and faster responses.”

Many consumers report feeling that debt payoff terms and collection practices were misleading or harmful to their financial well-being, according to BBB.

To avoid problems, BBB recommends consumers compare financial institutions carefully before opening an account or taking out a loan.

Nakashima said some credit unions and online-only banks may offer lower fees or interest rates than larger banks, but consumers should weigh those benefits against potential limitations in communication or in-person service.

BBB also advises consumers to confirm whether an institution is federally insured. Banks should carry FDIC insurance, while credit unions should be insured by the National Credit Union Administration, which protects deposits up to $250,000.

Finally, BBB encourages consumers to research a company’s reputation before doing business with it.

“That means looking up reviews, complaint history, accreditation status, and how businesses respond to customers,” Nakashima said. “You want a financial institution that prioritizes transparency, responsiveness and treating customers fairly.”

BBB offers free business research and consumer tools at BBB.org.