Time to Reduce Your Credit Card Debt: Don’t Suffocate

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News Team

The pandemic has made financial stress worse for those who had no savings before. Inflation, high interest rates, and the end of pandemic-related aid have led to record levels of credit card debt. Americans owed $1.1 trillion on their credit cards in the fourth quarter of 2023, according to data from the New York Federal Reserve.

Silvio Tavares, president and CEO of VantageScore, warned that “considerable signs of stress are beginning to be seen,” even though consumers generally report good financial health.

If you owe a lot on your credit card or cards, here are some tips to consider:

Ask to lower your credit card interest rate. You should ask your credit card company to lower your interest rate. However, you’ll likely have to pay a fee by balance transfer and pay off your balance before the window of a certain promotion ends, otherwise additional interest will accrue. Reports on the perception of the banking industry show that banks are increasingly conservative at the moment of making loans, which means it could be more difficult to refinance the debt.

Pay off the debts with the highest interest rates first. This strategy is known as ‘the approach of the avalanche’, which consists of paying off first the debt that accumulates interest the fastest. This is the most sensible financial method for managing your debt, according to some financial planners. Another strategy, known as ‘the snowball approach’ looks more at the psychological aspect of paying off smaller debts first. This can generate momentum and optimism before facing higher debts.

Consolidate your loans if possible. Counselors also encourage consumers to consolidate their loans at fixed rates, always that they are available. The Federal Trade Commission’s consumer guide to paying off your debt can help you make a plan. When it comes to student loan payments, make sure all of those debts are consolidated and that you’re taking advantage of any opportunity to lower their cost monthly.

Take inflation into account when budgeting. While inflation is below its peak, the price of many goods and services remains high. Bread, which cost $1.54 in December 2020, reached $2.02 at the end of last year, according to the Bureau of Labor Statistics, while the average rent for a property with up to two bedrooms rose from $1,424 at the end of 2020 to $1,713 at late last year, according to realtor.com.

America Saves, a nonprofit campaign of the Consumer Federation of America, also offers advice. Since the pandemic, some monthly service providers have become more open to negotiating their bills — already be it cable television, telephone, internet or car insurance services. Contacting these companies can result in significant savings, said Kia McCallister-Young, director of America Saves, who advises calling to ask for the lowest rate, rebates and coupons available. If a supplier competes with other companies, you are more likely to get a discount.

The Public Service Loan Forgiveness (PSLF) program is one of several forgiveness alternatives still available to many student loan borrowers.

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Finance, Health, Lifestyle

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