You might want to reconsider your credit card approach in front of a potential recession since credit card debt balances in the U.S. are rising.
This is due to the fact that credit card debt has increased by 13% since last year, and that debt will only increase in cost as more interest rate increases are anticipated later this year. Here are some options available to you, as suggested by licenced financial planners:
Don’t wait any longer to pay off your credit card debt
“This should be a top priority regardless of where we are in an economic cycle, but very important in times of high inflation and potential economic downturns,” explains SoFi certified financial planner Kendall Clayborne.
That’s because rising interest rates often coincide with increasing outstanding accounts. Credit card interest rates have increased over the previous few months from just over 16 percent to 17.42 percent; but, Ted Rossman, senior industry analyst at Bankrate.com, predicts that by the end of the year, they may be closer to 19 percent.
Ask for a lower rate with your credit card company
Making a simple phone call to your credit card company and requesting a reduced interest rate is one of the simplest ways to reduce credit card charges. They might say no, but if you’ve been a consistent customer and your credit score is rising, they might agree.
If credit card offers from rival businesses have interest rates that are lower than the one you pay on your current card, mention them to support your argument. Additionally, you can request that they waive your annual cost.
Think about transferring your credit card debt
A balance transfer is when debt is transferred from one credit card account to another in exchange for a lower interest rate.
Companies that issue credit cards frequently offer introductory rates of 0% interest for up to 21 months. Lower payouts are the result, at least temporarily. However, after the initial 0% period has passed, you will still need to make regular payments.
The availability of 0% for 21 months offers has recently decreased, although they are still available. Just keep in mind that you normally need a strong or exceptional credit score to qualify and that a balance transfer charge of between 3 and 5 percent of the total amount moved may be required.
Obtain a cash-back card if you’re not a very much traveler
Although the rewards for travel cards normally have high redemption rates, if you don’t expect to travel much in the upcoming year, it might not be worth it. Additionally, they frequently have annual fees.
A cash-back rewards card might be a better choice if you’re concerned with making ends meet. These credit cards don’t offer many benefits, but they frequently give 2 percent to 5 percent cash back on purchases made in important categories like grocery or gas. These cards are a fantastic way to partially mitigate the price effects of inflation.
Conduct a subscription audit of your credit card spending
A poll conducted in 2021 by consulting firm West Monroe found that nearly 90% of consumers significantly underestimate the amount of money they spend on subscriptions, frequently by several hundred dollars.
For this reason, you should perform a regular subscription audit on your credit cards on a yearly basis at the very least. Easy to accomplish: Look back a few months on your credit card accounts to find recurrent charges you’ve either forgotten about or don’t need.
This may involve purchasing iPhone apps or TV streaming subscriptions. You can cancel such subscriptions and save money, whatever they are.