Mike Brown: The pandemic recession combined with holiday shopping has spiked credit card debt. Here are some tips to pay it back | Columns

The United States, alongside the rest of the world, has now been battling the coronavirus pandemic and recession for almost an entire year.

The macroeconomic impact of this age-old scourge is almost unprecedented. Unemployment figures not seen since the Great Depression, hundreds of thousands of small businesses permanently closed, billions of dollars in government stimulus.

And when the macro is so harsh, the mic is surely there to feel it.

From coast to coast, millions of Americans struggled to pay their mortgage or rent each month, knowing where the next meal would come from.

To make matters worse, the past month has brought with it the holiday season, the priciest time of the year.

How did Americans give gifts to friends and family after spending nearly an entire year battling tooth and nail through a devastating economic crisis?

The answer, according to a new study from LendEDU, was credit card debt.

After surveying American adults, LendEDU found that 67% of consumers had cut their vacation budget this year due to the coronavirus pandemic and recession. 33% of them took on credit card debt to cover vacation costs, even after the budget had already been cut.

And for 63% of Americans, the amount of credit card debt they incurred this pandemic-ridden holiday season was the most they had ever incurred. This includes 75% of Americans who have lost their jobs due to the pandemic and are still unemployed.

In fact, 55% of consumers said they were losing sleep over their new credit card debt balance.

When only survey participants from Wisconsin were analyzed, 59% cut their vacation budget this year and 29% took on credit card debt to cover seasonal expenses.

And while 40% of Wisconsin residents said the credit card debt they racked up over the 2020 holiday will be the highest they’ve ever had, at least no respondents from The Badger State indicated that he was losing sleep over his debt.

So if you’re one of those people who had no choice but to rack up credit card debt to cover 2020 holiday expenses during the pandemic recession, how are you going to pay it off in 2021?

It may be worth looking into a balance transfer credit card first, ideally with no annual fee and an introductory APR of 0% on balance transfers for at least three months.

With a balance transfer credit card like the one described above, you transfer all existing credit card debts to a new card and those debts will accrue no interest during the introductory period, which could last a year. whole.

This means that 100% of your monthly payments go towards the principal balance, allowing you to pay off credit card debt much faster rather than having to continually pay interest charges on top of principal payments. .

Another option would be a debt consolidation loan, which usually has a much lower interest rate than a credit card. With this product, you transfer several credit card debts into a single loan with a single monthly payment at a fixed interest rate, which should make repayment easier.

If you are not interested in a product, you can consider repayment strategies such as debt avalanche or debt snowball methods.

With the former, you pay off your credit card debt with the highest interest rates first and tackle the cheaper debt later. Over time, you should end up paying less interest.

With the latter, you pay off your credit card debt with the smaller balances first and save the larger ones for later. This strategy is really more of a confidence booster than anything else, because in theory eliminating debt quickly should give you the momentum to keep going.

2021 is hoping to be a brighter year than 2020, and a good place to start getting there would be to eliminate that credit card debt from a holiday season we’ll never forget.

As Director of Communications at LendEDU, Mike Brown uses data, usually from surveys and publicly available resources, to identify emerging personal finance trends and tell unique stories. Brown’s work, featured in major outlets like the Wall Street Journal and the Washington Post, provides consumers with a personal finance metric and can help them make informed financial decisions.

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