Tuesday, October 4, 2022

How Much Credit Card Debt Do You Have

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How To Pay Off Credit Card Debt When You Have No Money

Even if you cant pay off your debt in full, lowering the balances on your credit cards by any amount is usually a smart financial decision. Consistently chipping away at your account balances little by little can be an effective way to become debt free in the future.

In addition to making small payments, you may also want to pay down your credit card debt in a specific order. The following could take your efforts to the next level.

  • The Debt Snowball: List your credit card balances from highest to lowest. Make the minimum payment on each account. Then, concentrate all of your extra funds on the card with the lowest balance until you pay it off in full. Move to the card with the next lowest balance and repeat the process.
  • The Debt Avalanche: List your credit card debt based upon the interest rate of each accountfrom highest to lowest. Make the minimum payment on every card. From there, apply any extra funds toward the account with the highest interest rate until you pay it in full. Then, repeat the process on the account with the next highest APR.

Beware Of Debt Settlement Scams

Some companies offering debt settlement programs may engage in deception and fail to deliver on the promises they make for example, promises or guarantees to settle all your credit card debts for, say, 30 to 60 percent of the amount you owe. Other companies may try to collect their own fees from you before they have settled any of your debts a practice prohibited under the FTCs Telemarketing Sales Rule for companies engaged in telemarketing these services. Some fail to explain the risks associated with their programs: for example, that many consumers drop out without settling their debts, that consumers credit reports may suffer, or that debt collectors may continue to call you.

Avoid doing business with any company that promises to settle your debt if the company:

  • charges any fees before it settles your debts
  • touts a “new government program” to bail out personal credit card debt
  • guarantees it can make your unsecured debt go away
  • tells you to stop communicating with your creditors, but doesnt explain the serious consequences
  • tells you it can stop all debt collection calls and lawsuits
  • guarantees that your unsecured debts can be paid off for pennies on the dollar

How Much Credit Card Debt Is Okay For My Financial Situation

Understanding how much credit card debt is okay for your credit rating is one thing, but knowing how much credit card debt is okay for your personal financial goals is quite another.

While using credit cards can be a useful strategy for dealing with financial emergencies, there simply is no good reason to carry a balance on your credit card. The amount you pay on interest each month is money that youre not able to put toward things like education, buying a house and saving for retirement. Paying off high interest credit cards as soon as possible is one of the best ways to achieve your financial goals.

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Some Doing Better But More Struggling Financially Due To Covid

In talking about debt in 2020, its impossible to ignore how COVID-19 has affected Americans finances. When asked if their household financial situation had gotten better or worse since the onset of the pandemic, 14% of U.S. adults in the survey reported better, 42% say worse and 43% said their household finances stayed the same.

Of those Americans who say their household financial situation has gotten worse since the pandemic began, 51% say its because their household income decreased overall, 30% say its because they had an unexpected large expense and 22% attribute it to them losing their job, according to the survey.

Parents of children younger than 18, Latinos and Americans with household incomes of less than $50,000 have been hit particularly hard. Close to half of parents of minor children say their household financial situation has gotten worse since the onset of the pandemic of those people, more than 7 in 10 say its because their household income has decreased overall or theyve lost their job.

In the survey, Latinos are more likely to say their household financial situation has gotten worse than Black and white Americans . More than a quarter of Americans with household incomes under $50,000 say their household financial situation has gotten much worse since the onset of the pandemic .

To cope, some Americans have taken on debt credit card, medical or otherwise or withdrawn money from savings to pay for bills/necessities , the survey found.

How Can I Avoid Overspending During The Holidays

How Much Credit Card Debt Is Too Much?

Shoppers expect to spend almost $1,000 this season on gifts, food, decorations and other holiday-related purchases, according to the National Retail Federations 2021 forecast.

But Ms. Opperman said many clients have told her they are still paying off credit card bills from last year. She suggests focusing on enjoying time spent with loved ones during the holiday season rather than buying pricey gifts. She said she asks clients: Do you remember what gift your sister or brother bought you last year? Often, she said, they dont recall. But they do remember playing a fun game or sharing a meal. Its more about the memories of the time spent with family and friends.

Mr. Jacobs recommends breaking out the credit card only for items you know you can pay off within a month. If you dont have money up front for it, you shouldnt be buying it, he said.

He also suggested starting to build an emergency fund, if possible, of three to six months of living expenses. That way, youll be less likely to rely on high-interest card debt if you have an unexpected bill.

As for the holidays, a basic step to avoid overspending is to make a plan before shopping for how much you will spend, said Abigail Sussman, an associate professor of marketing at the University of Chicago Booth School of Business who studies how consumers make decisions. Setting a low spending goal can be helpful, she said.

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How Much Debt Is Too Much Debt

About Casey

Casey is a reformed sports journalist tackling a new game of financial services writing. Mike Francesa once called her a great girl.

At a Glance

Debt is completely normal. Total household debt in the U.S. reached $14.64 trillion in the first quarter of 2021, according to the Quarterly Report on Household Debt and Credit.

The average American has more than $90,000 in debtincluding all types of consumer debtaccording to a CNBC report.

But figuring out when youre in over your head with debt can be subjective. Managing a large amount of debt will be easier to navigate for some than others. But how much debt is too much debt? Lets break it down:

Transfer Your Balance To A Credit Card With A Lower Interest Rate

This is a good strategy for people who have a low balance, but who are getting killed on interest rates. The strategy is this: take advantage of a low introductory offer on a new credit card to get your balance paid off quicklyand cheaply.

Look around for a credit card that has a zero-percent interest rate for a set amount of timemost companies have these, and the introductory term is usually about 6 to 12 months. You’ll probably be charged a balance-transfer fee , but this amount will be heartily offset by the money you’ll save on interest.

Apply for the card, and once youre approved, transfer your old balance to the new card. You now have a new loan with zero interest.

Before you stampede out to do this, keep two things in mind. Firstthis works best if you have good credit. The new lender has to approve you for that shiny low intro rate, and if your credit is bad, they may not.

Second, that intro rate will jump after the term is overand you could find yourself trapped worse than before.

Do this only for a balance you can pay off quickly. Mark the day the intro rate expires on your calendarand get that loan paid off before then, no matter what.

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Average Credit Card Debt By Race

People who identified as white reported their families carried an average of $6,940 in credit debt the highest amount of any racial group.

They were followed by “other” which includes Asians, American Indians and people who identify as multi-racial with an average credit card debt of $6,320. Black households carried the least debt with an average of $3,940, which is 37% lower than the nationwide average.

What Is The Best Way To Pay Down Credit Card Balances

HOW MUCH DEBT DO I HAVE? | Credit card debt total @ the beginning of my debt free journey

Because credit cards typically charge double-digit interest rates, most financial advisers agree that youll save the most money if you focus on paying down the card with the highest interest rate first. I prefer the avalanche method, said Benjamin Jacobs, a fee-only financial planner in Athens, Ga., using a common name for this approach.

Heres how it works: Make the minimum payment on all of your cards to avoid late fees, but put any extra money you have toward the highest-interest balance. When that balance is paid off, move on to the next card, and so on.

But some people may be more motivated by paying off the card with the smallest balance, regardless of its interest rate. The mechanics of this approach, sometimes called the snowball method, are the same: Pay the minimum on all cards, but put extra cash to the smallest balance until its gone, then move to the next card. I like the snowball, because you have instant success, said Melinda Opperman, president of Credit.org, a nonprofit financial counseling agency in Riverside, Calif.

If you feel overwhelmed and are falling behind on payments, you may consider seeking help from a nonprofit credit counseling agency. Those agencies can help assess your situation and negotiate a plan with your card companies to allow you to pay off balances over time typically, two to five years. The National Foundation for Credit Counseling can help get you started.

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Mortgage Debt: How Much Is Too Much

Speaking of rising prices, the median price of a house in the U.S. was $18,000 in 1963. It was $341,600 by 2021, according to the National Association of Realtors.

Rising prices are good news if you already own a home, but not if youre looking to buy one. And the housing market can collapse the Great Recession of 2008 showed that..

Auto Debt: How To Tell If You Have Too Much

If you havent shopped for a car in while, get ready for sticker shock. The average U.S. light-vehicle transaction price was $40,472 in 2021, according to Kelley Blue Book.

That was an all-time high and it doesnt look like the upward trend will stop. On average, consumers are paying $563 a month for new car loans, according to Experian.

With prices so high, the once-traditional 48-month payment plan has been stretched to 72 and even 84 months. Lower monthly payments make cars more affordable, but with interest charges, you could end up owing more money than the vehicle is worth. And remember, a new car drops about 11% in value the minute its driven out of the dealers lot, so pay attention to the cars resale value.

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How Much Debt Is Too Much

There’s no magic number as to how much debt is too much, although the rule of thumb is to try and keep your credit utilization level at less than 30% in total.

Remember that this is total or “aggregate utilization” that’s calculated by your credit score, so taking out a new card to spread your debt across cards to reduce your utilization rate on each card may not be a good strategy to lower your utilization. It can potentially hurt your credit score to do this, because taking out a new card will result in a “hard inquiry” or credit check of your score something that can also reduce your score.

However, if your available credit limit increases, it may not affect it.

You Use Balance Transfers

Do You Have Too Much Credit Card Debt?

Many creditors offer new credit cards with balance transfers available at low interest rates for an introductory period. Its important to remember, though, that after the introductory period the interest rates typically skyrocket to 18% or more. Additionally, credit card companies are charging fees for transferring balances. If you keep switching credit card balances, you may have a problem managing your finances.

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How Many Americans Are Currently Delinquent With Their Credit Card Payments

Just 1.89% of credit card accounts are currently at least 30 days delinquent.

According to the most recent delinquency data from the Fed, the 30-day delinquency rate fell from 2.12% to 1.89% in the first quarter of 2021.

Thats a stunning number, marking the first time since the Fed began tracking these rates in 1991 that the rate has fallen below 2%. It is a huge difference from what we saw during the Great Recession, during which delinquencies peaked at nearly 7% in 2009.

Average Credit Card Debt In The United States

According to Experian, the average credit card balance in the United States reached $6,194 in the second quarter of 2019, the most recent period for which data is available.

However, the average doesn’t tell the whole story. Approximately 52% of Americans have credit card balances of $2,500 or less.

Alaskan consumers have the highest credit card debt, with an average of $8,026. New Jersey residents are second, with an average credit card balance of $7,084.

Iowa consumers have the lowest credit card debt, with an average balance of $4,744, followed by Wisconsin with an average of $4,908.

Percentage of U.S. credit card holders
$2,500 or less

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How Can I Make A Formal Complaint

If youre not happy with this response, or if the firm doesnt get back to you, you can get in touch with the Financial Ombudsman Service within six months of receiving the reply.

The ombudsman will need to know basic personal information, what the problem is and how you want it to be solved, and details of the policy or account the complaint relates to.

It will then ask the business for their side of the store and weigh up what has happened.

It can decide you havent lost out financially, or it could say youve been treated unfairly and that the lender needs to put things right.

This could involve compensation.

The process typically takes more than three months and longer if the complaint is particularly complex.

Consolidate Credit Card Debt

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If you carry balances on multiple high-interest credit cards, consider getting a balance transfer credit card. These cards usually have an introductory interest rate that can be as low as 0%. These promotions typically last for six to 12 months, giving users lots of time to use this feature and avoid costly interest charges. Usually, cardholders will be subject to a balance transfer fee of between 1% and 3% on the amount transferred. That is generally less than what the user would have to pay in interest on their standard credit card.

You can use this initial period to start paying down your debt faster however, keep in mind, the lower interest rate doesnt generally apply to new purchases. If you are serious about paying down your balance, you will want to cut your spending and take advantage of the balance transfer period.

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You Are No Longer Able To Pay Your Bills

Your electricity is cut off, or you can no longer make calls because you have not paid your bill. It is probably not the case that you do not want to pay your account, but you simply can no longer keep track of all these payments. Indeed, thats a sign that something must be done. You may have already considered borrowing money from family, but this is not always the best solution. Consult a financial expert who will tell you how to handle your finances. DebtQuest can help you in case you have questions.

See If Our Program Is Right For You

Ways To Tell That You Have Too Much Credit Card Debt

There are three simple ratios you can use to asses if you have too much credit card debt:

  • shows you when you have so much debt that its bad for your credit score.
  • Debt-to-income ratio measures when you have too much debt to get approved for new credit.
  • tells you when your minimum payments are becoming too much for your budget to handle.
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    Do Most People Pay Credit Card Bills In Full Or Carry A Balance

    Consumers who pay their credit card bill in full every month and avoid interest are known as transactors, while consumers who carry a balance and pay interest are referred to as revolvers. The number of revolvers is steadily falling while the number of transactors is on the rise.

    • The percentage of Americans who pay their credit card bill in full rose 1.5 percentage points to a record high of 33.7%4, according to data from the ABA. The number of transactors hit an all-time high for the second quarter in a row.
    • The percentage of revolvers fell during that same time period, to a record low of 40.7%4 of all accounts. The number of dormant accounts during that period rose a slight 0.1% to 25.6%4.

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