The Covid-19 has triggered unprecedented financial challenges for many individuals and families.
Today, a survey shows exactly where many of them are feeling the pinch – their credit card balances.
Bankrate.com finds that 42% of American adults with credit card debt have increased these balances since the start of the Covid-19 pandemic in March 2020. Of the society An online survey was conducted in early September and covered 2,400 adults, of whom 1,297 had credit card debt.
Of those whose debts rose, 47% said it was directly caused by the pandemic.
“This shows just how widespread and persistent a credit card debt problem can be,” said Ted Rossman, senior industry analyst at Bankrate.com.
Granted, while many Americans have seen their credit card balances swell, others have been able to reduce those debts since the onset of Covid-19.
Overall, credit card balances are down significantly, according to the latest data from the Federal Reserve.
The results of the Bankrate.com survey show that these financial improvements were not shared equally by households, Rossman said.
Plus, once you’re in credit card debt, it can be difficult to get out of it. The reason: the average annual percentage rate is over 16%.
The survey found that 54% of adults have month-to-month credit card balances, and 50% of those people have been in credit card debt for at least a year.
“It tends to be a long-term kind of systemic thing,” Rossman said.
The average person with credit card debt owes $ 5,525. By making only the minimum payments, they will be in debt for about 16 years and pay more than $ 6,000 in interest, Rossman said.
The good news is that as the economic recovery progresses, credit card companies are once again offering 0% balance transfer agreements that dried up earlier in the pandemic, he said.
These offers can allow borrowers to suspend their interest for up to 20 months while they attack those debts.
Typically, you need a credit score of at least 700 to qualify for any of these offers. In addition, you must make monthly payments on time in order to maintain this 0% rate.
More from Personal Finance:
Make these financial and professional changes before you quit your job
If you are looking for a hotel deal, it may pay off to wait
How to know when to re-enter the market after the last drop
Alternatively, nonprofit credit counseling can help borrowers consolidate their balances, negotiate lower interest rates, and make a plan to get out of debt.
Borrowers can also consider going it alone by consolidating their debts with a personal loan, increasing their income or reducing their expenses so they have more money to spend on their balance, Rossman said.
If you’re feeling overwhelmed with your monthly credit card statement, Rossman said taking these extra steps can help:
- Find out where you are by writing it down. What is the total you owe? What is the interest rate on this debt?
- Identify the ways to reduce your debt that work for you. Your choices may include the Avalanche Method, where you prioritize debts with the highest interest rates first, or the Snowball Method, where you eliminate smaller balances first.
- Don’t be afraid to ask for help. Find someone you trust, such as a spouse, friend, family member, or professional financial advisor, who can help you with the problem and potential solutions.
- Avoid chasing after rewards if you pay high interest rates. If you already have a high balance on your credit card, it doesn’t make sense to keep spending on that card to get points or other offers. Instead, use cash or a debit card for your daily expenses while you work to reduce your debt, Rossman said.