By Jordan Woods
A recent study has shown a 4% increase in U.S. adults carrying credit card debt. About 23% of existing credit cardholders have added to their current debt due to the pandemic. COVID-19 is directly impacting consumers’ ability to manage credit card debt.
Healthy credit usage is paying more than the minimum payment each month and charging only what you can afford. But in 2020, “healthy” might not be feasible. If finances are tight and you need to increase your credit usage to cover your bills and essentials from month to month, do so— don’t stop there. There are simple yet impactful steps that we can take to minimize the impact that financial struggles have on our credit health, both during and after the pandemic.
A great first step is to talk to a Credit Counselor, like GreenPath, who can contact your creditors with you and ensure you understand your options. Counselors can focus on your entire financial situation and make personalized plans to address the debt moving forward. Many people have received options and improved their financial health with a debt management program, The program provides a clear strategy for handling your credit card debt will help you feel more in control of the situation and reduce stress.
Credit card companies have programs to help people through almost any situation. It is worth sparing a few minutes on the phone to find a solution that will suit you.
When talking to your creditor(s), be honest. Being forthcoming about your financial means is the best way for a creditor to offer you favorable terms. If you’re still making regular payments, request a reduction in your interest rate due to hardship allowing you to save money on past and future purchases.
Do not over-promise or commit to terms that aren’t feasible. Whatever remedy you agree on is only as beneficial as your consistency in adhering to the terms of that agreement.
Also, keep in mind that if your creditor has granted a payment deferment or waived fees, the interest could still be accruing, and annual fees could still apply.
Sometimes the best remedies aren’t available with the creditor. Balance transfers offer a chance to move your debt from one credit card company to another, often with a promotional interest rate of 0%, potentially enabling you to pay the debt sooner. But it all depends on the details. How long is the promotional rate? What’s the interest rate after that? Can I maintain the requirements to keep that promotional rate?
Are you thinking of taking on new debt? Calculate the payments needed each month to pay off the balance in full before the temporary period expires. What can seem like a good deal at the start can turn into a high-interest balance long after the initial purchase.
Be honest with what you deem as being “essential” in your budget. Utilize savings or hardship plans as needed and know the terms of your agreements. Be proactive in your communication with creditors as your situation evolves. These are actionable steps for any income level.
From entering the workforce during the Great Recession of the early 2000s, to now trying to keep our jobs and maintain income levels amid the COVID-19 pandemic in 2020, millennials have been financially impacted in a major way by things that have largely been outside of their control. However, there is hope. There are countless small actions to take that will have an immeasurable positive impact on both your short term and long-term financial health.
For more information on managing credit card debt, visit GreenPath.com
GreenPath is committed to making Detroit financially healthy. Click the link to learn more about the Detroit Voices program and share your voice www.Greenpath.com/Detroit-voices