Americaâ€™s total outstanding credit card debt now sits at $1.034 trillion, the highest it has been since 2008. This is the result of an over reliance on credit and some disturbing new trends. Here are some tips to handle these trends and keep your credit card debt from becoming insurmountable.
After 2018 we found ourselves over $60 billion in the hole when it comes to our nationwide credit card debt. A disturbing trend best avoided.
Last year, Dentist’s Money Digest® discussed some of the surprising credit card trends from 2017 leading into 2018 based on analysis from personal finance site WalletHub. For 2019, WalletHub updated its study and found that while Americans repaid $40.8 billion in credit card debt during the first quarter of 2018 we also added back $108 billion in credit card debt over the next three quarters.
The country’s total outstanding credit card debt now sits at $1.034 trillion, the highest it has been since 2008. WalletHub’s projections also show a likely $60 billion increase to our credit card debt by the end of 2019.
This does not necessarily project doom for the future of the economy, nor does it necessarily show that consumers are weakening financially, but it is cause for concern as it shows an overdependence on credit card debt that is only getting worse. In order to avoid further credit card debt, it’s important to understand some of the trends leading to increased debt and how best to handle them.
Last year the charge off rate was up 2.7% year over year, and while the slight decrease to this year’s 2% is a good sign, the steady increase of the charge off rate is still worrisome as a rising charge-off rate is a sign of an economy under duress. A charge-off itself is when you ultimately miss too many payments and the creditor stops your account from making any new charges and will look to recoup their loss through a lawsuit, in some cases, if you do not pay as soon as possible.
It is nowhere near the highs of an 11% charge off rate in 2010 but making sure your credit card isn’t considered a charge-off is crucial before your creditor looks to you to repay them with money you may not have.
Make sure your credit payments are on time every month and at the minimum payment that is needed to avoid interest from accruing, no matter the situation. Some creditors will allow you to set up an automated payment to avoid the hassle of having to make the payment yourself. If the credit card in question doesn’t allow you to automate your payments, then you can do your own form of automation by setting a monthly reminder to make your payments before their due date. It is also important to keep the payment amount consistent with each month in order to not disrupt your budget too much. You can adjust the payment amount accordingly depending on your financial situation, just make sure it’s never below the expected minimum.
According to the data, the average household debt in Q4 of last year was at $8,788. The highest it has been since 1986, and steadily going over being sustainable. While $327 is not an insurmountable amount of money, it isn’t a small amount. Leaving many households constantly fighting off their debt when dealing with their finances.
If you’re already looking at a lot of credit card debt this may seem counterintuitive but adjusting your credit score for the better will ultimately lead you to paying off outstanding loans faster. This is because with a better credit score you can look to refinance one of your loans. This means you can go to your previous borrower, or a new borrower, and show your better credit score to them and receive a more affordable loan. One that the borrower will have more confidence in you paying back giving you a more favorable interest rate to handle. As you pay off your other outstanding debts faster you can turn back to your credit card debt with more financial room to maneuver.
These are only a couple of the ways you can look to handle your credit debt in the face of some disturbing nationwide trends. However, there is no one solution fits all scenario because your financial situation is uniquely your own. Looking to improve your credit is a long-term solution that you might not have time for in the short term, thus it may be best to stick to making consistent payments but adjusting your savings elsewhere in your personal finances. Ultimately, the solution that works for you will have you avoiding joining the growing majority of those in insurmountable debt and give you financial peace of mind.