Nearly half of credit card holders (46 percent) carry monthly debt, according to a recent report Financial analysis. That’s up from 39 percent last year.
Unfortunately, those balances are more expensive than ever. Of the average credit card payment 19.85 percentthe highest since we began tracking these rates in the mid-1980s.
And the balances are higher too. Of the Report of the New York Fed the number of credit card balances increased by 15 percent from the third quarter of 2021 to the third quarter of 2022 (this is the latest data available). This is the largest year-over-year increase in a record set dating back to the early 2000s.
Credit card balances were only slightly below the all-time high set in the fourth quarter of 2019, just before everything changed. does not cause COVID-19. In 2020 and early 2021, credit card balances dropped significantly as more people used their stimulus money to pay off debt. The disease also caused many people to reduce their spending. Credit card balances were low in the first quarter of 2021, 17 percent below the high set in the first five quarters, but we posted almost all of the improvements.
Why do people get into debt?
Contrary to popular belief, most people get into credit card debt for practical reasons. The above statement is an emergency, according to research done by our sister site CreditCards.com. It shows the importance of building a emergency deposit. Without one, your next unexpected medical bill, home repair or auto repair could end up costing you a lot of money. credit card interest.
Day-to-day expenses are the second most common explanation for credit card debt. This section is most appropriate in the current climate since everything is more expensive these days. Although inflation has begun to slow, food prices are still rising by nearly 12 percent over the past year and housing prices are up 7.5 percent more recently. Consumer Price Index.
Inflation is hitting people with low incomes the hardest. They have little money to spend, and their budgets are basic necessities, so there is not much room for cuts. Our latest survey found that 55 percent of cardholders with annual household incomes under $50,000 carry balances from month to month.
It drops to 42 percent for those making between $50,000 and $79,999, 40 percent for those making between $80,000 and $99,999 and 37 percent for those making at least the $100,000. But, most people, even those who earn six figures or more.
Ways to get out of debt
Paying off your debt may seem easier said than done, especially now, but there are many things you can do. My top sign up for a 0 percent balance transfer card. These allow you to roll over your current debt onto a new card with no promotional interest for up to 21 months.
I think the best way to use one of these is to divide what you owe by the number of months in your 0 percent period. Try to stick to a payment schedule – it’s harder to pay the full amount if you put it off until the end, or it muddies the waters by adding new values.
A personal loan This is another benefit of debt consolidation. If you have good credit, you may be able to qualify for a low interest rate of about 7 percent for a period of seven years. You can use this money to pay off your credit card debt faster and then repay the personal loan at a better rate over a longer period of time. give
Popular unfunded credit counseling agencies like International Finance Debt management plans can often be made. You don’t even need a great scoreboard.
Finally, don’t forget about the important things. You can do a inconsiderate, sell what you don’t need or cut your expenses? Every dollar you can transfer to your credit card represents a guaranteed, tax-free return. Depending on your interest rate, it could easily be 20 percent or more.
One thing is for sure: Try to pay more than the monthly minimum. If you have a normal credit balance ($5,474, according to TransUnion) and you only make fewer payments at a typical interest rate of 19.85 percent, you will owe 202 months and you will owe $7,637 in interest.