The Average American Has Over $ 5,000 In Credit Card Debt
With New Year’s resolutions fast approaching, people are starting to take a little more careful look at their finances.
Credit card debt fell sharply during the pandemic – by $ 106 billion between the first quarter of 2020 and the second quarter of 2021 according to MoneyGeek. But the average American still has more than $ 5,668 in their credit card balance.
The Federal Reserve’s most recent consumer credit report, released on Dec. 7, shows the average APR on credit cards earning interest is 17.13%, the second highest since the government began to follow this data in 1994. This means that the average person would pay $ 970 for every year they do not pay off their balance.
âTrying to pay off debt actually has some real similarities as another resolution: lose weight,â said Doug Milnes, head of data analysis at MoneyGeek. “What credit cards do is separate the fun and the pain from spending.”
So how do you work to effectively pay off this credit card debt?
Make a budget. Taking a close look at your finances and creating a budget may be the best way to start paying off debt. This will allow you to see where you are spending the excess money and save money so you can put more on your credit card balance.
âDecide not to take cash or your wallet with you if you’re going out and could go shopping,â Milnes suggested.
Pay with cash rather than a card. Research has shown that paying physically in cash is painful. According to Avni Shah, an assistant professor of marketing at the University of Toronto Scarborough, people who bought something with cash were more likely to value that item than someone who paid for it on credit. She tested her theory at Duke University, where she sold cups to students for $ 2. She asked one group to pay in cash and another to pay on credit. Professor Shah went back to each buyer two hours later and told them she had to redeem the mug and asked the person to give their price. Professor Shah found that those who paid by card asked an average of $ 3.83 in return, while those who paid in cash asked an average of $ 6.71.
“What is going on [when you pay with credit] are you going, ‘I really want to feel the pleasure of this purchase and it’s not thwarted by’ here’s my money ‘, âexplained Milnes.
Consider setting up automatic payments on your credit card debt. If you’re comfortable enough, Milnes suggests setting up automatic payments to reduce your credit card debt. Maybe after you got your paycheck. He says spending that money at the start of your pay period will require you to put money into your balance when your account is healthy, and it will also require you to focus your spending for the weeks leading up to your next paycheck. because that money will not be available to spend.