42% of Americans increased their credit card debt during Covid-19
42% of Americans increased their credit card debt during Covid-19

Covid-19 has triggered unprecedented financial challenges for many individuals and families.

Now a survey shows exactly where many of them are feeling the pinch – their credit card balances.

Bankrate.com finds that 42% of American adults with credit card debt have increased their balances since the start of the Covid-19 pandemic in March 2020. Of the society An online survey was conducted in early September among 2,400 adults, 1,297 of whom had credit card debt.

Of those whose debts have increased, 47% said it was directly caused by the pandemic.

“This shows how widespread and persistent a problem with credit card debt can be,” said Ted Rossman, senior industry analyst at Bankrate.com.

Certainly, while many Americans have seen their credit card balances swell, others have been able to reduce those debts since the onset of Covid-19.

Overall, credit card balances have fallen significantly, according to the latest data from the Federal Reserve.

Bankrate.com’s survey results highlight the fact that these financial improvements have not been shared equally by households, Rossman said.

Also, once you’re in debt on your credit card, it can be hard to get out of it. The reason: the average annual global effective rate is higher than 16%.

The survey found that 54% of adults carry credit card balances month over month, and 50% of those people have had credit card debt for at least a year.

“It tends to be kind of a long-term, systemic thing,” Rossman said.

The average person with credit card debt owes $5,525. By making only the minimum payments, they’ll be in debt for about 16 years and paying more than $6,000 in interest, Rossman said.

The good news is that as the economic recovery progresses, credit card companies are starting to offer 0% balance transfer offers that dried up earlier in the pandemic, he said.

These offers can allow borrowers to suspend their interest for up to 20 months while they tackle these debts.

Generally, you need a credit score of at least 700 to qualify for one of these offers. Plus, you need to make monthly payments on time in order to hang on to that 0% rate.

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Alternatively, nonprofit credit counselors can help borrowers consolidate balances, negotiate lower interest rates, and develop a plan to get out of debt.

Borrowers can also consider going it alone by consolidating debt with a personal loan, increasing income or reducing expenses so they have more money to spend on their balances, Rossman said.

If you’re overwhelmed with your monthly credit card statement, Rossman said these additional steps can help:

  • Figure out where you are by actually writing it down. What is the total you owe? What is the interest rate on this debt?
  • Identify ways to reduce your debt that work for you. Your choices may include the avalanche method, in which you prioritize debts with the highest interest rates first, or the snowball method, where you eliminate the smallest balances first.
  • Don’t be afraid to ask for help. Find someone you trust, such as a spouse, friend, family member, or professional financial advisor, who can help you with the problem and possible solutions.
  • Avoid chasing rewards if you pay high interest rates. If you already have a high balance on your credit card, it makes no sense to keep spending on that card to get points or other offers. Instead, use cash or a debit card for day-to-day expenses as you work to reduce debt, Rossman said.

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