U.S. credit card debt hits a record high—but yours doesn’t have to
“Americans’ outstanding credit card debt hit a new record in November, highlighting a more confident U.S. consumer but also flashing a warning signal of potential trouble down the road.”
—USA Today, “Credit card debt hits new record, raising warning sign,” 1/8/2018
As they say, the party has to end at some point. If you’ve been celebrating with your credit cards the past few years because of the post-recession low (ish) rates, the alarming news that U.S. credit card debt has hit an all-time record should be a good indicator it’s time to turn on the lights, recycle those empty wine bottles, and kick everyone out. And most of all, pay off those balances.
Based on information released from the Federal Reserve this week, USA Today reports that revolving credit—of which over 95% is comprised of credit card balances—just hit the $1.023 trillion mark, nudging the figure “past the $1.021 trillion highwater mark reached in April 2008, just before the housing and credit bubbles burst.”
Another troublesome aspect? Credit card delinquencies have “inched up to about 7.5% from 7% a year ago,” reports USA Today, “underscoring growing stresses for low-income households in particular.”
I’m not going to say this will all add up to another financial crisis (there are plenty of other experts who will gladly take on that mantle), but scary credit card news serves as a good reminder to get a grip on our own debt—especially as interest rates are starting to tick up across the board. Here are four ways to get started now:
Automate your payments
If possible, pay off any current credit card balances in full—and continue to pay them in full each and every month from here on out. Setting up automatic payments is a great way to stay on top of that, as long as you have the money in the bank to cover those monthly deductions.
Go above the minimum
If you can’t swing the full balance, at least try to make a dent in what you owe by paying more than the minimum amount. Even just going another $10 above the minimum can save you tons of money down the line.
Negotiate a lower rate
If even an extra $10 a month is too much, contact your card issuer and inquire about getting a lower rate (yes, this is possible!) or buy yourself a little extra time by transferring your current balance to a new interest-free card—one with no annual fee.
Try not to make purchases with your credit card that you don’t have the cash to cover. Doing without that pasta press attachment for your KitchenAid stinks in the short-term, I know—but finding yourself swimming in debt you can’t get out of down the line will hurt a whole lot more.
Trust me: By winding down the credit card party now, you’ll be preventing a serious financial hangover in the future.