Tips for Reducing Credit Card Debt, Even if Balances Are Already Lower
While American balances are down over all, interest can still add up. If your stimulus check isn’t going to cover basics, consider reducing your debt.
By Ann Carrns
The new year is a good time to focus on paying down credit card balances accrued over previous months, particularly during the holidays, even if, like many Americans, you are carrying less credit card debt than you were before the pandemic.
Over all, American credit card balances dipped 13 percent from the end of 2019 through the third quarter of 2020, as consumers spent less and whittled card debt during the pandemic, according to federal data.
Requests for help with credit card debt typically spike at the start of a year, according to Money Management International, a nonprofit credit counseling agency, but “we have not seen the normal increase we would have seen,” said Thomas Nitzsche, a spokesman for the agency.
The pandemic put a halt to vacations and dining out. Americans who didn’t lose their jobs were left with more cash to pay down card debt. And the federal government’s pandemic relief efforts, including cash stimulus payments, further bolstered their finances, said Ted Rossman, an industry analyst for CreditCards.com. The Federal Reserve Bank of New York found that people who received the first round of stimulus payments mostly saved the money or used it to pay debts.
Of course, not everyone has been so lucky. About 42 percent of Americans said their financial situation had worsened since the start of the pandemic because of job losses or drops in income, according to a survey by the financial website NerdWallet. Nearly half of those in worse shape said they had taken on debt to pay bills and cover necessities, according to the survey, which Harris Poll conducted in November via online interviews of more than 2,000 adults.
“The pandemic has absolutely turned everything upside down when it comes to household finances,” said Sara Rathner, NerdWallet’s credit card expert.
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