Credit card debt has declined during the pandemic, with figures from the Experian credit bureau showing average debt has fallen from $ 6,194 in 2019 to $ 5,313 in 2020.
But debt is still a dark cloud hanging over many households in the United States as many face job losses or pay cuts due to the pandemic.
While some people have been able to use stimulus checks, tax refunds and savings to help pay off debt, many need this money just to get by.
The issue has even caught the attention of experts like Warren Buffett and Suze Orman, who urge Americans to prioritize debt clearing.
If you face a mountain of debt as the pandemic continues, there are ways to ease the burden.
Who takes care of the heaviest load?
Although credit card debt has declined throughout the pandemic, many cardholders still have an outstanding balance.
As of March, Americans collectively owed $ 807 billion on nearly 506 million card accounts, according to an analysis by LendingTree’s ValuePenguin.
Just over 45% of families have some type of credit card debt, with high incomes and college graduates both holding the highest balances.
What explains the disparity?
In 2018, 40% of Americans revealed that they would have a hard time paying a surprise expense of $ 400, according to a Federal Reserve study.
Not much has changed since then, as a Fed report last year showed that the number of Americans who could raise $ 2,000 for an unexpected bill declined dramatically throughout 2020.
This should come as no surprise when you consider that as soon as the pandemic struck, millions of applied for unemployment benefits when they were forced to leave their workplace.
The United States reported a record unemployment rate of 14.7% – the highest figure the Bureau of Labor Statistics has reported since it started tracking this data in January 1948.
And as 23.1 million people were left unemployed last April, many have had to drain their emergency funds (if they had any) or rely on credit cards to get out of the pandemic, as nearly a quarter of consumers told CreditCards.com they need to add to their debt to get through the crisis.
What would the experts advise?
Warren Buffett, CEO of Berkshire Hathaway addressed the issue of credit card debt at his company’s annual meeting last year.
Buffett thinks that while Americans love their credit cards, they are way too expensive.
He advises you to use an influx of cash as your tax refund to help clear those balances.
Meanwhile, Suze Orman takes a bit more of the “necessary evil” approach when it comes to credit cards. She is actually more concerned with the weight of student loans.
“Student debt is debt that you can never get rid of in most cases. So this debt is really, really important, ”Orman told CNBC.
For this reason, Orman suggests tackling your student loan or other secured debt before clearing your credit cards.
Another secured debt you can consider paying is your mortgage. Better rate refinancing could potentially save you a few hundred dollars per month.
Other ways to reduce your debt
Whatever debt you have on your plate, if the bills start to pile up and you struggle to keep up, you have options.
Back up your policy. If you haven’t looked for a better deal on your auto insurance, you may be paying up to $ 1,100 each year. Take the tour to make sure you get the best possible rate. Then apply the same approach to your home insurance to make sure save hundreds every month on this policy too.
Consolidate your debt You can also save money by consolidating all your debts into one. low interest consolidation loan. You won’t have to worry about forgetting to pay multiple creditors at different interest rates.
Save big on every purchase. Even if you’re working on a tight budget, you’ll still need to stock up on essentials. Make sure you are always getting the best price in download a free browser extension which will automatically scan the web for coupons or the best deal every time you shop online.
Get money for your clutter. If you’ve been hit hard by the spring itch, why not channel your manual labor into cash? And if you find something in the process that no longer sparks joy, post it for sale on a site which gives you 33% more in return than other second-hand shopping sites.
Turn your pennies into a wallet. These days, it’s easier than ever to dive into the world of investing – and it doesn’t have to cost a fortune. Download a popular app that lets you invest with your “spare currency” and turn your pennies into profits.