Gephardt Busts Inflation: How to tackle credit card debt
Apr 3, 2023, 11:32 PM | Updated: 11:32 pm
SALT LAKE CITY — Reaching a record $930.6 billion, credit card debt in America has never been higher. Balances are well above what they were before the pandemic hit. The double whammy is the interest rates on those balances are going up, too. So, how do you get a hold of that debt before it breaks you?
In those heady days of the pandemic — all that not going to concerts, not eating out at restaurants, and not taking trips — saved us a whole lot of money. But when the world re-opened, all bets were suddenly off, said certified financial planner Shane Stewart of Deseret Mutual Benefits Administrators.
“We felt like we deserve to get out and about, and unfortunately, for some, that included some increased debt,” Stewart said.
So, how do you tackle that debt? Stewart says start by tracking what you are actually spending.
“Without knowing that, you’ll just be in a debt cycle,” he said. “You’ll just continue to go around in circles with your debt because you don’t know what the cause of that is.”
Money apps like Mint, Goodbudget, or Nerdwallet can help you see exactly where your cash is going and where you can cut back.
Stewart said have an emergency fund to help keep an emergency from derailing your debt plan. And then you can start your actual attack by paying the most you can on the smallest debt first, while you make the minimum payments on the rest. Once that account is paid off, move on to the next smallest debt until that one is paid off — and on and on.
Stewart said the endorphin rush that comes with each debt paid is powerful.
“It motivates you to take that money that you were paying to the first debt and put it towards the second debt,” he said.
Or you might start on the debt with the highest interest rate, then work your way down. That can save you hundreds on interest, but Stewart says that method typically delivers less of an endorphin rush. But if this strategy motivates you, go with it.
“Whatever works for the individual is king,” Stewart said. “Whatever works for you is the best thing to do.”
The best way to stay on track? Stewart said: automate, automate, automate. Set up your bank’s bill pay or an app to make automatic payments on your debts.
“Then you’re not making that decision literally thousands of times over your lifetime,” he said. “You’re making that decision one time and then you maintain that. You tweak it as you go.”
Stewart said you must be proactive. If you are not going to make next week’s payment, call your creditor now rather than two weeks later. The absolute worst thing you can do is nothing. That stack of credit card bills will only get worse.