Many Americans have seen their credit card debt surge during the Covid-19 pandemic. A new consumer survey conducted by Bankrate.com found that 42 percent of U.S. adults holding credit card debt have moved deeper in debt since March 2020. Here are important points from the online financial survey conducted in September 2021.
Credit Card Debt Survey Details
The survey collected data from 2,400 adults. Of that total, 1,297 participants reported credit card debt. Among these Americans with debt, 47 percent claimed it was a direct result of the pandemic. To put this stat into perspective, at the same time many Americans have been able to manage or reduce their debt despite economic challenges.
A deeper look at the data reveals that 54 percent of adults carry credit card debt balances from month to month. Half of those individuals have held their debt balances for a year or longer. Meanwhile, the average American credit card debtor owns their creditor $5,525. Yet overall credit card balances in the United States, according to the Federal Reserve, have declined significantly during the pandemic.
How Debt Piles Up
Bankrate.com senior industry analyst Ted Rossman says regarding consumers trapped in debt that “it does tend to be a long-term systemic kind of thing.” For an individual that owes $5,525, the debt spiral is difficult to escape due to the interest rate. If the consumer holds the debt balance for 16 years, the amount they pay back will exceed $6,000.
A high interest rate in the double digits makes it extremely difficult for low-income earners to pay down the principle in a timely manner. Debt becomes more dangerous when multiple credit cards are used to pay bills. Instead of one pile of debt, a consumer with five credit cards can start to build five mountains of debt.
Merging multiple mountains of debt back into one giant debt pile – but with a lower interest rate – is what many financial advisers promote. Each consumer has their own individual needs, so there’s no one-size-all debt consolidation solution for everyone. It’s much safer for consumers who are deep in debt to get financial guidance from experts than to experiment with risky get-rich-quick solutions like gambling.
Solutions to Manage Debt
As the overall economic recovery advances, credit card companies lower interest rates on consumers to attract borrowing and debt consolidation deals. Americans are seeing offers for zero percent balance transfers that weren’t available during the height of the pandemic. In some cases these no interest deals extend for 20 months, but require consumers to pay monthly bills on time to maintain the deal.
Credit score is a big factor as to who can and cannot get zero percent interest loans. A credit score of at least 700 is usually necessary for Americans to qualify for such special deals. Here are essential steps a consumer can take to resolve out-of-control credit card debt:
1. Assess financial position
2. Identify options for debt reduction from expert sources
3. Contact a professional financial consultant for assistance
4. For high interest rates avoid rewards
Debt consolidation is a common solution consumers choose to reduce the financial monthly strain that chronic debt brings. By reorganizing the debt and lowering the monthly interest rate, consumers are able to pay bills more easily and get out of debt faster.
Getting back on track financially usually requires careful budget planning. That means deciding on expenses at the beginning of every month and sticking with the plan. Cutting or limiting nonessential costs such as entertainment often helps steer back toward financial stability.
Over half of American consumers have accumulated credit card debt, as the rest of the nation has maintained steady finances. Income level and and strategic budget planning are crucial factors that limit debt. Part of securing the right debt consolidation plan is finding one that offers comfortable monthly payments. Contact a debt reduction expert for more information on how to take control of financial planning.