Financial Problems on Horizon for U.S. Households
Two key economic indicators are increasing which might point to financial problems for US households. This week the Federal Reserve indicated that they may raise interest rates again in June. The Federal Reserve also released statistics showing that consumer borrowing on credit cards and revolving debt jumped at an annual rate of 4.5%, the fastest pace in 10 months.
"In April, consumers added $3 billion in credit card debt and interest rates also hit a five-year high. The standard credit card rate is now over 14%, and that rate will probably be higher in July," says Bill Hardekopf, CEO of LowCards.com. "In March, we were actually encouraged by a drop in borrowing on credit cards. Unfortunately, this large increase may be a sign that households are struggling financially. Even though they know rates are increasing, they still have to use credit cards."
Reducing or eliminating credit card debt should be a priority for families who want to move beyond financial survival. The first step should be contacting the credit card companies and requesting a lower rate, especially if you have a good payment history but your rate is much higher than 13%. This is a simple suggestion, but it works. Even if the rate is lowered only 2%, that is extra money that money can be used to pay down the balance. If they turn down the first request, be persistent and call again in a month or three months.
If you carry a balance, don't use your credit card to pay for gas. "Gas is expensive enough without paying and additional 14% in interest. If you pay $150 for gas each month, the interest payment adds $20 per month. The gas you bought is gone before you ever get the credit card bill," says Hardekopf. "If you carry a balance, the same rule applies to food and entertainment."
Another option is transferring your balance to a lower rate card. "If you expect to receive a tax refund or a bonus in the next year, transfer your balance to a card with 0% APR on balance transfers for 12 months. Extra money from tax refunds, gifts and bonuses can help significantly pay down the balance," says Hardekopf.
"In April, consumers added $3 billion in credit card debt and interest rates also hit a five-year high. The standard credit card rate is now over 14%, and that rate will probably be higher in July," says Bill Hardekopf, CEO of LowCards.com. "In March, we were actually encouraged by a drop in borrowing on credit cards. Unfortunately, this large increase may be a sign that households are struggling financially. Even though they know rates are increasing, they still have to use credit cards."
Reducing or eliminating credit card debt should be a priority for families who want to move beyond financial survival. The first step should be contacting the credit card companies and requesting a lower rate, especially if you have a good payment history but your rate is much higher than 13%. This is a simple suggestion, but it works. Even if the rate is lowered only 2%, that is extra money that money can be used to pay down the balance. If they turn down the first request, be persistent and call again in a month or three months.
If you carry a balance, don't use your credit card to pay for gas. "Gas is expensive enough without paying and additional 14% in interest. If you pay $150 for gas each month, the interest payment adds $20 per month. The gas you bought is gone before you ever get the credit card bill," says Hardekopf. "If you carry a balance, the same rule applies to food and entertainment."
Another option is transferring your balance to a lower rate card. "If you expect to receive a tax refund or a bonus in the next year, transfer your balance to a card with 0% APR on balance transfers for 12 months. Extra money from tax refunds, gifts and bonuses can help significantly pay down the balance," says Hardekopf.
Posted by Lynn at
11:47 AM
Links to this post:
Create a Link
<< Home