At the start of the pandemic, it was found that credit card debt in America was decreasing. It is believed that a combination of relief checks, shut downs, and job uncertainty kept credit card spending low. Now that stimulus checks have ended and unemployment benefits have decreased, American’s are seeing a rise in credit card debt. As reported by the Federal Reserve Bank of New York, its quarterly report found that credit card bills have risen by $17 billion in Q2 of 2021 to a national debt of $790 billion. This is the first time credit card debt has gone up after a year of decline.
Many American’s working from home have decided to move or take on a mortgage where they feel more comfortable, causing mortgage debt to rise. Low interest rates have also contributed to increased mortgage debt. In addition, the shortage of computer chips, and thus new cars have caused both the used and new car market to increase in value. This has caused more auto loan debt.
Clever, a real estate firm, has found that 18% of American’s has credit card debt totaling over $20,000 and 40% of those who carry credit card debt have not been debt-free since 2018. “We also found that 57% of people had missed a credit card payment, and the majority of those were in the past year,” says Francesca Ortegren, lead researcher for Clever.
The 20+ month pandemic has affected many American’s who are tired of being cooped up and ready to start spending, traveling, and moving on with life. All of this data is leading to one thing. American’s are digging themselves into a deeper hole and something needs to be done fast to reduce debt.
What American’s Should Be Doing
There are a growing number of new credit cards and offers that offer 3% balance transfers and 0% introductory periods of up to 21 months. Citi Bank offers a few different credit card products with this promotion. You can also check out Chase or Discover. These balance transfer offers can help you reduce your high interest debt and pay off your debt sooner.
An alternative is to open up a HELOC, or Home Equity Line of Credit. These low interest options are good alternatives to balance transfer credit cards. You can use your HELOC to pay off amortized interest loans such as student loans, personal loans, car loans, or mortgage debt. Read my post on Top 5 HELOC’s of 2021.
Consider recalculating your savings. You should have 6 months of expenses in an emergency savings account. If you have other savings accounts or more than 6 months of emergency savings, then use the rest of your savings to pay off debt. With no monthly debt payments, you can build up your savings much faster. Use a budgeting, spend tracking, and saving spreadsheet. You can make your own or purchase one from me through the Shop Page.
Try to make passive income or find other ways to save with my related posts below:
- Saving by Spending Less
- Ways to Save Money for the Long Term
- 5 Hacks that Help You Save
- Top 3 Micro-Investing Apps
- The 5 Best Micro-Saving Apps
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