A recent report from WalletHub, the personal finance site, shows that American consumers added $30 billion in credit card debt during the third quarter of 2023which represents the third consecutive increase in the third quarter, to owe a total of $1.23 billion dollars in total.
WalletHub projects that Americans will end the year with $100 billion more in credit card debt than at first, in part due to high inflation and record interest rates.
And for those who are overly committed to card debt, WalletHub has the following suggestions.
Tips for managing credit card debt
1. Make a budget and stick to it
It’s hard to spend within reason or plan savings if you don’t know how your monthly spending compares to your take-home pay or where that money goes. That’s why you should get your spending in order (including debt payments, emergency fund contributions, and other savings) and trim the fat, if necessary. Most importantly, once you develop your budget, Make sure you stick to it or you’ll just have wasted your time..
2. Create an emergency fund
With a cash safety net to fall back on, you won’t be as likely to fall behind on your bills in the event of emergency expenses or unplanned unemployment. Your goal should be to gradually save about one year’s worth of after-tax income. In other words, set aside a little each month until you have a good mattress.
3. Improve your credit
This may seem a bit counterintuitive, since more credit could mean more debt. But Improving your credit situation will have a dramatic impact on the cost of your debt. And reducing the cost of your debt will allow you to pay it off faster. Better credit can also make it easier to find a job or a place to live, both of which impact your bottom line. You can check your latest credit score for free and get personalized tips to improve your credit at WalletHub.
4. Try the island approach
The island approach is a strategy that involves using a collection of credit cards, each of which has a specific purpose. For example, you could Transfer your existing debt to a 0% balance transfer credit card to save on finance charges and get out of debt sooner. And you could use one or two rewards cards (maybe one with travel rewards and one with cash back, or maybe a store credit card) for purchases that you’ll be able to pay off before the end of the month. This will allow you to get the best collection of terms possible.
5. Pay off your most expensive debt first
Most people with serious credit card debt have multiple balances. If that’s you, try the “avalanche method.” That means dallocate most of your monthly debt payment to the balance with the highest interest rate and make the minimum required payment on the rest. Once you’ve paid off your most expensive debt, repeat the process until you’re debt-free.
6. Evaluate your employment situation
In some cases, all the budgeting and planning in the world won’t be enough to solve your debt problems. You may need to explore if there are better paying opportunities for people with your experience or consider acquiring some new skills to become more marketable. This may require a small investment in yourself, but as long as you get a worthwhile return, it’s money well spent.
· The 10 states in which their inhabitants have the most debt and financial difficulties, according to a WalletHub survey
· The US has a new consumer spending record of $18.86 trillion in October 2023
· American consumer feels more confident about their finances than a year ago: WalletHub Survey