You might be able to tell from your bank statements, but if you didn’t already know, consumer credit card debt is once again getting out of control.
That’s according to the Federal Reserve, which reported that credit card debt reached $870 billion at the end of December 2018. That’s the largest tally ever!
Why credit card debt continues to edge upward
“Non-housing balances increased by $58 billion in the fourth quarter, with auto loans increasing by $9 billion, credit card balances going up by $26 billion, and student loan balances by $15 billion,” the Fed’s report said.
It’s clear that credit cards are having a moment. Consumers are swiping (and inserting the chip) at a torrid pace and credit card companies are benefiting big-time.
Consumer credit card debt: How did we get here?
How did we get here? At the end of 2016 and beginning of 2017, credit card companies scanned the economic landscape — new U.S. president, stable consumer confidence, new year — and made a concerted effort to increase the borrowing power of Americans.
You know that popular Oprah gif (You get a car! You get a car! You get a car!)? That’s what basically happened for U.S. consumers.
The Federal Reserve report says that credit inquiries — a key indicator of consumer credit demand — declined over the last six months “to the lowest level seen in the history of the data.”
Reduce your debt: Action plan
Money expert Clark Howard says the key to paying off credit card debt is to make it a priority. “I usually find setting a goal of paying down debt in 36 months or less works best for people,” he writes. “If the end goal is any further out than that, people tend to lose their focus.”
“Once you decide to make your debt a priority, you need to start paying more than the minimum monthly payments. That will allow you to eliminate the debt faster, save money on interest — and most importantly, stay motivated to get the job done and behind you!” Clark says.
Credit card debt can eat you alive, if you let it. The card issuers have a vested interest in getting you to spend more and more, but it doesn’t have to be this way.
Here are three ways to cut your debt:
3 Clark-approved ways to tackle credit card debt
- ‘Skip a payment’? No thanks: Many banks and stores will send you a promotion that lets you “skip a payment.” Don’t fall for it. It’s just an easy way for your outstanding balance to accumulate additional interest, which adds to your debt.
- Pay up every 14 days: If you can, try to pay something on your credit card bill every 14 days. If you can sync these payments to your bill due-date cycle, you can shrink your balance much quicker.
- Don’t close that card: Resist the temptation to close the credit card once you’ve paid it down. The three major credit-reporting agencies put a lot of credence into consumers who are able to responsibly hold onto their credit cards without going into debt. Basically, it can increase your credit score if you have credit cards with zero balance.
Here are some other debt-related articles on Clark.com you might enjoy:
- Here are 3 OTHER ways to tackle your credit card debt
- Stay motivated. Join our ‘Ditch Your Debt’ Facebook group
- Your guide to paying off credit card debt
6 rules to stay debt free