Last summer, U.S. credit card debt made headlines when it exceeded $1 trillion for the first time. Credit card debt has continued to rise despite receding from the articles in recent months.
Credit card balances increased by $1.13 trillion to $50 billion in the third quarter of last year, according to the Federal Reserve Bank of New York’s Weekly Report on Household Debt and Credit. Additionally, another loan rates increased. In fact, total household debt is at a traditional large of $17.5 trillion.
The national credit situation is gloomy, and things aren’t that much different locally. Individuals ages 20 to 64 in the St. Louis region have an average of $4, 580 in credit card debt. According to the St. Louis Fed’s year-end 2023 information obtained from the Federal Reserve Bank of New York Consumer Credit Panel/Equifax, that is a little lower than the national average of $4, 837.
According to Forbes Advisor, the average credit card interest rate was 27.9% as of late March, making credit card debt difficult to manage due to high interest rates on balances carried past the grace period.
You might wonder why people carry so many credit card debt given how expensive it is. One reason involves philosophy.
For example, we tend to put a premium on present benefits and discount (or minimize) future benefits. This can help us understand why we might choose to purchase the things we want right away rather than wait and instead use debt to offset the cost of the payments.
That may also help explain why we may want to use our credit cards for the smallest amount of money, as it allows us to continue putting off costs.
Failure to pay off your credit card after attention is added, it only means you’re paying a lot more. If you’re up to the task, here are some techniques for responsible credit card control.
Some people’s main issue is that their monthly investing is higher than their regular net income. But step one is controlling your day-to-day investing.
Begin by tracking your investing. This may entail keeping a journal to record all of your spending, even the smallest details that don’t look crucial, like a to-go latte or a fast-food meal. Online security check your records. Make sure to keep track of each credit card or pay service you use if you use them all.
Once you have a clear picture of how much money you’re spending and what you’re spending it on, you can create a budget to make sure that your saving and money are consistent.
Of course, setting up a budget is the easy part. It only works if you stick with the saving limits you’ve established. It’s similar to creating an exercise plan to improve your health but not going to the gym by not sticking to a budget.
Paying off the balance in full each month will help you prevent high interest rates when using credit cards. There are two common methods for paying off debt.
The first step is to pay off your credit card with the lowest balance, then work up the second lowest balance, and so on until all of your accounts have been paid out. To keep you going, this method relies on a sense of accomplishment.
The second approach is to pay off your credit accounts first with the highest interest rate, then work with the next highest interest charge card, repeating this until all of your accounts have been paid out. This may imply paying less total and achieving your objectives more quickly. But, in the end, the important thing is to pay off the debt—whichever process you choose.
Remember, Financial Literacy Month is a great time to take command of your money. The St. Louis Fed offers free assistance tools. Begin at stlouisfed. org/education.
The Federal Reserve Bank of St. Louis’s financial knowledge officer is Wolla. His opinions do not always reflect those of the St. Louis Fed or the Federal Reserve System, and they are his individual.