Credit card balances hit record levels at the end of last year, and experts are predicting they will only continue to increase over 2023.
“Whether it’s shopping for a new car or buying eggs in the grocery store, consumers continue to be impacted in ways big and small by both high inflation and the interest rate hikes implemented by the Federal Reserve, which we anticipate may continue for at least a few more months,” Michele Raneri, vice president of U.S. research and consulting at TransUnion, said in a press release.
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The release from the credit reporting agency also showed total credit card balances in the U.S. hit $930 billion in the fourth quarter of 2022. This marks an 18.5% increase over Q4 of 2021 when balances were sitting at $785 billion.
However, just how much you owe on your card could vary depending on what generation you were born into. A study from life insurance company New York Life found that Gen X actually has the most credit card debt, at an average of $7,004 per person.
But no matter your age, if you’re buried in bills, there are things you can do to help dig your way out faster.
How much does each generation owe?
Gen X is racking up the bills, with over $7,000 in credit card debt — and the boomers aren’t far behind.
According to the New York Life study, here’s how much each generation owes on average:
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Gen Z: $2,876
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Millennials: $5,928
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Gen X: $7,004
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Baby boomers: $6,785
Raneri tells Moneywise that Gen X is in their high earning years in their careers. “I think that they’re getting just more money in general, and spending more money.”
She adds that people of this generation may be nearing retirement age and are likely reluctant to tap into their savings for their golden years — leading them to rely on credit cards instead.
They are also part of the “sandwich generation”, which means they are more likely to be financially supporting both their children and aging parents.
Both Gen X and boomers are more likely to both own a home and accumulate equity on it, compared to younger generations, Raneri notes. So if they’re low on funds, they might seek to borrow more from their credit cards or borrow against their equity.
On the other hannd, millennials are more likely to be buying their first home and securing a mortgage.
“Definitely seeing them using personal loans too. That’s been something that people have liked to do — to get a handle on their debt to consolidate it,” Raneri says.
And Gen Z often relies on buy now, pay later (BNPL) plans to help spread out their purchases, instead of paying for items all at once using their credit cards.
How to get rid of your credit card debt
Regardless of what year you were born in, consider employing these tactics to help make your debt more manageable.
1. Negotiate with your creditors
This may come as a surprise — but you can actually give your credit card issuer a call and politely ask them to reduce the interest rate on your card.
You’re more likely to get approved if you’re a proven reliable borrower, who pays their bills on time and has a strong credit score. You should also let your issuer that you want a lower rate to pay off your debt load.
You might want to start with the issuer you’ve had credit with the longest — since they may want to reward your loyalty — or the issuer of the card with the highest interest rate, so that you can reduce how much interest you ultimately pay in the long run .
If they say no, try requesting a temporary reduction on your credit card’s interest rate for a short period of time. If that fails, try asking about any repayment assistance options that might be available to you — it’s worth a shot.
2. Consolidate your debt
Got a bunch of different bills on the go? The more you have, the more difficult it can become to keep track of your debts — especially ones that come with sky-high interest rates.
Consider rolling your debts into one consolidation loan, so that you’ve only got one bill to pay as opposed to bills coming in from multiple creditors.
Picking a debt consolidation loan with a lower interest rate will also save you money in the long run. Just keep in mind that you’ll need a decent credit score of at least 670 to qualify for a better interest rate than what you’re paying now.
3. Switch to a balance transfer credit card
You could also move your debt over to a balance transfer credit card with lower interest rates.
First make sure the balance transfer fees don’t outweigh what you’re already paying in interest — fees typically range between 3% to 5%, but some may offer an introductory 0% APR for a limited time.
If you qualify for that 0% APR rate, look for a card with the longest promotional period and make a plan to pay off your balance before it expires.
Issuers will be looking for borrowers with good credit scores of at least 670.
4. Bring in a professional
If you have exhausted your other options, it might be time to try bringing in a professional to help.
Reach out to a trained credit counselor who can offer advice on budgeting and managing housing expenses, as well as get you started on a plan for paying down your debt.
Credit counseling is typically offered by non-profit organizations and you can speak with a professional online, over the phone or in person. Some may even offer free services.
A credit counselor can put you on a personalized debt management plan, where you’ll make monthly payments to the organization — which will in turn make the separate payments to your various creditors. The credit counselor can also negotiate with your creditors to extend your repayment periods or lower your interest rates.
You’ll need to collect any documents that would give a credit counselor a clear picture of your financial situation, like your income, debt, expenses and assets.
Make sure you do your research on the company and check for the counselor’s qualifications and certifications before you commit to any plan.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
Source: finance.yahoo.com