If your credit card debt grew out of control during the pandemic, you’re hardly alone. Some 51% of U.S. adults with credit card debt added to it during COVID, according to a new survey from CredtCards.com. And nearly half of those people blame that increased debt on the pandemic itself.
Job losses and furloughs, along with the decision from parents, especially mothers, to leave the workforce while their children were learning virtually, have triggered big challenges to our finances.
According to the CreditCards.com survey, nearly two-thirds of respondents said they’d have trouble making even the minimum payments in the near future if the COVID vaccine isn’t widely available by June 2021. And millennials, in particular, have added more credit card debt than other generations. According to the survey, 55% of millennials, who are more likely to work service jobs that have been hard hit during COVID, have gone “more deeply” into debt since March 2020.
Credit card debt can be difficult to navigate. High-interest rates can make that debt grow very quickly and more difficult to pay off. It also can lower your credit score, throwing up another obstacle later when you need to get a loan for a mortgage, rent an apartment or even find a job.
If your credit card bills have increased during COVID, here’s how to get them under control.
Depending on your financial situation, this might be easier said than done if you’re relying on your cards to pay for food or other necessities because of a job loss, for example. But continuing to use the cards will only make the situation worse. If you’re able, stop using the cards until you’ve paid them off. At the very least, only use the card with the lowest interest rate.
The debt snowball and debt avalanche are two popular ways to pay off debt. With the strategy, you list your debts from smallest to largest and start tackling the bill with the smallest total first. With the debt avalanche method, you list your debt with the highest to lowest interest rate and then work to pay off the debt with the highest interest rate first. In both cases, you continue to pay the minimum amount on each card to avoid penalties.
The debt snowball approach allows for some quick wins, which can help to motivate some people to keep moving forward. The debt avalanche strategy might be better for people who are more focused on the numbers, including how much they’re paying in interest.
Banks, credit card companies, and other financial institutions offer loans that cover your total debt. So, instead of paying off multiple credit card bills with varying interest rates each month, with a debt consolidation loan, you have one single interest rate, one monthly payment, and, potentially, a longer repayment period so the payment is affordable. But be cautious about these loans. The Consumer Financial Protection Bureau notes that the advertised low-interest rates could grow over time. The loan also may include some extra fees and costs that could make this option more costly than simply paying your bills off on your own.
If you’re in over your head and need the help of a professional to tackle your credit card debt, a debt management plan created with the help of a nonprofit credit counseling agency like CESI Solutions can help. With debt management plans, your debt is combined, and you make one monthly payment to the nonprofit agency, which then pays your creditors for you. These plans typically have lower interest rates than a typical credit card and allow for debts to be paid off faster than if you tried to tackle it on your own.
If you are experiencing financial difficulty and are looking for a solution, nonprofit credit counseling can help you make sense of all your options. Contact us today for a free financial assessment with one of our certified credit counselors.
Consumer Education Services, Inc. empowers people to overcome their financial challenges and lead financially-healthy lives.
CESI is NOT A LOAN COMPANY