It’s the word that’s on everyone’s mind these days – inflation. As of June 2022, it was up by 9.1%, and it’s taking a chunk out of American families’ budgets. To get by, some are trimming costs and cutting corners, some are digging into their savings, and others are leaning on their credit cards. For those struggling to keep up with living costs and mounting debt, we have a few tips on how to fight inflation and lower your credit card payments.
Facts About Credit Card Debt & Inflation
In the 2nd quarter of 2022, credit card debt rose by 13%, credited to both rising inflation and rising interest rates. It’s one of the highest jumps in over two decades. On top of this, the current average credit card interest rate is close to 18%.
Adding to this financial stress, recent reports found that 64% of Americans are living paycheck to paycheck. Perhaps more surprising is that 48% of people making over $100,000 per year are also living paycheck to paycheck.
And data shows that people are concerned. According to a recent survey, almost 70% of Americans are worried that a recession is right around the corner, and 82% are worried that inflation will have a negative impact on their lives. Adding to this – a little over 70% don’t believe that their income is keeping pace with these current economic issues. For these Americans, the rising cost-of-living + high-interest payments are a recipe for disaster.
How to Reduce Credit Card Payments
If you’re one of the 64% that are living paycheck to paycheck and you’re watching your savings shrink, you need some strategies for reducing your overall debt and lowering credit card payments. Here are a few ways to do that:
Cut some extra corners
You’re probably already making some lifestyle changes and adjustments in response to rising costs. If not, look for things you don’t need, things that you can live without. Once your financial ship rights itself, you can add them back in – or better, you might find you don’t miss them as much as you thought you would.
Likewise, there might be some things that you enjoy that you can replace with a similar, lower-cost item or service. For instance, trim your out-to-eat, out-to-drink budget and make your coffee and meals at home. Or, shop around for a better TV/internet package or better rates on auto and home insurance.
Get a side job or side hustle
Look around your house and find things you no longer want or need then sell them online via platforms like Facebook Marketplace. You know the saying, “one man’s trash is another man’s treasure”? Every little bit helps.
If you can swing it, you could also take on an extra job for a while. Use all your second income to pay off your debt, starting with the highest interest payments first. With the rise in remote work options, you might not even need to leave home.
Use windfalls wisely
If you happen to receive a cash gift, bonuses, or commissions – invest this extra money in paying down your credit card debt. It might be tempting, especially after trimming budgets and pinching pennies to indulge yourself a bit, but taking a chunk out of your debt will feel better in the long run.
Refinance your home or auto loan
Even though interest rates have risen slightly, it’s still worth checking the benefits of refinancing your home or auto loans. Especially with local credit unions like 1st Ed, you can usually find a better rate that will have an immediate impact on your monthly budget. You can then use your extra funds to pay off and lower your credit card payments.
Opt for a debt-consolidation or personal loan
Personal loans often feature low interest rates and are a great option for consolidating credit card debt and getting a more manageable monthly payment.
Switch to a low interest rate credit card & transfer your balances
Last, you can ditch those high-interest credit cards altogether. Again, local credit unions like 1st Ed offer better rates with their credit cards. There’s no reason to stick with your high-interest ones. Here are some of the benefits of our VISA® Classic or Platinum credit cards:
- No annual fee
- No cash advance fee*
- No balance transfer fee
- 25-day grace period on purchases
- Online access – monitor accounts and make payments online
- Card Controls with CardNav
- Earn Rewards Points – redeem for gifts with Platinum VISA®
- Local account servicing. View your charges and account history online or in person.
- Make easy payments by transferring funds from one of your 1st Ed deposit accounts.
And, of course, transferring your balances to a lower interest rate will immediately lower those monthly credit card payments. To apply online, visit https://www.1edcu.org/loans/visa-credit-cards/.
Remember, there’s no reason to fight inflation on your own. Talk with a 1st Ed representative for more advice on how to make your money work harder and go farther.