According to the New York Federal Reserve, credit card debt is the highest ever. Also, according to Bankrate’s 2025, which handles debt investigations, 64% of borrowers carrying credit card balances each month have delayed or avoided other financial decisions as a result of credit card liabilities.
Despite the alarm bells, Americans continue to rely on plastic in their wallets to cover emergencies and chase travel rewards. Like other financial products, credit cards can be a valuable tool. But for too many Americans, credit cards are the anchor around the neck.
A hopeful way of thinking is to keep consumers in credit card debt
The road to the biggest credit card is paved with good payment intent. No one is trying to carry credit card balances or maximize their credit line, but Americans are spending more and more challenging time as costs and other economic factors rise. Please enter your credit card. For credit cards, enter them in a convenient way to pay that bill and delay costs. But before you know it, your credit card balance is out of control.
The data has this. Americans don’t pay in full monthly. in fact:
I may sound like a broken record, but my message to consumers rushing credit card debt and credit scores is to consolidate your credit cards and stop using them. Don’t stick to one.
“But Denny, you get travel rewards and free money when you buy,” you hear them say.
Certainly, credit card rewards can be attractive, and when used correctly, credit cards can help improve your credit score. However, in most cases, these benefits are not worth the cost. If you carry your balance, you are paying interest and the fees may be higher. The average credit card rate is over 20%. That cost negates any reward benefits you may earn. Plus, if they have to spend money to get rewards, they are not free.
Question of the month: How do I get off the credit card merry-go-round?
Ideally, you will use debt payoff strategies such as snowball and avalanche methods to repay your credit card balances and then reassess your spending habits to avoid being locked up in the debt cycle. However, if your budget is too strict to accommodate the extra money in your debt, consider the following:
Do not use a balance transfer card
This is reliable integrated advice, scratching my head every time I hear it. Paying back one credit card balance with a new credit card will keep your credit card debt alive. Balanced transfer credit cards, especially credit cards with 0% introductory APR, are valuable, but if you are struggling with credit card debt, this product will not solve the problem.
Instead, you will pay off your balance with a personal loan
Personal loans can knock out spinning of revolving debts. They have a fixed interest rate. This means predictable monthly payments and set payment schedules, providing an easy path to your salary date.
To minimize the costs of interest, choose the shortest cost Debt settlement loan A term that is affordable. A personal loan calculator can help you compare the monthly costs and overall costs of several loan options.
Consider using Buy Now and pay later
Buy Now, pay for the (BNPL) app later They get bad rap because it could be another over-the-top way. However, there are three major advantages over credit cards.
The next time you reach for a credit card to buy, ask yourself if a BNPL loan is better for your needs. They could be a good way to delay all costs of a purchase without paying interest, if You are sure you can pay.
However, just like with credit cards, take care and only use a BNPL loan if you really need it. After all, it’s not a good idea to go into debt for a burrito.
Credit cards caused a lot of heartache on my mortgage day
It was always the same story: when a customer was disappointed or angry that he was not qualified for that Smokin Law Mortgage fees Their credit score was too low, so I quoted them over the phone. I knew what I found on their credit reports.
A balanced credit card. Borrowers recently (not enough these days) have paid their cards in anticipation of applying for a mortgage. In any case, the results were the same. Credit scores have fallen, which have skyrocketed mortgage rates into the stratosphere.
Refinance customers had to wait, hoped the rate would remain low, or forked extra cash to buy their fees. Purchase customers felt a higher rate of cuts on their budget, which resulted in less purchasing power. In the worst case scenario, credit card debt and subsequent credit scores will allow you to live out of reach.
Either way, it’s a completely preventable scenario, and it only deepens my advocacy of using my credit card sparingly, especially if you’re planning on buying or refinancing your future home.
Final Words from Denny of your BFF (Best Financial Friend)
The best way to avoid credit cards is to avoid merry-go-rounds in the first place. But if you’re trapped in a debt cycle that’s already spinning, a personal loan is a good way to stop and get off.
Instalment debt (such as personal loans) can be easier to repay. You know exactly when your payment is completed. It does not affect your credit usage (but it affects your credit score in other ways). And while you will not be penalised for paying the “minimum amount”, you can always spend extra money on the principal and pay the debt faster.
Some credit card users can charge a bit here and there, earn rewards and pay back their balances each month. That’s great. But if you find yourself balanced regularly, it’s time to stop the merry-go-rounds that spin your debts and find a better way to manage your finances. It may hurt at first, but the result is a healthier wallet and makes you happy.
Do you have a question for Denny? Please email the writer [email protected].
