More Americans racking up credit card debt during COVID-19 pandemic
MONTGOMERY, Ala. (WSFA) - Credit card debt has spiked as the coronavirus pandemic continues across the country.
According to a new survey from creditcards.com, 47 percent of American adults are now carrying debt on their credit cards, that’s about 120 million people, and up from 43 percent in early March.
"As so many people have lost their jobs, it's become a lot harder to make ends meet. And we see a lot of people turning to their credit cards as a result," said Ted Rossman, an industry analyst for creditcards.com. "We found out about a quarter people in credit card debt have added to it just in the last two months. I think it shows just how many people are using your card to buy groceries and other necessities."
According to Rossman, the best advice in a normal time, would be to pay off that credit card debt as soon as possible, but the coronavirus pandemic has changed that way of thinking
“Credit card debt right now is a way of life for so many people. If you don’t have a lot of money coming in, and you don’t have a lot of savings, I actually think it’s ok to carry credit card debt for time,” Rossman said. “I think it’s even more important to keep some cash on hand. So when your stimulus check comes in, or if you’re getting unemployment, if you don’t have a lot of savings in place already, I think you need to preserve that money for necessities like food, shelter, and medicine."
Rossman said if you do need to carry credit card debt, the best way to do it is by asking your card issuer for a break.
When it comes to paying off your credit cards, Rossman explained the rules have changed since the pandemic began, and traditional methods of paying off your credit cards may not be enough.
“Because card issuers are really worried about new customers and risk right now, they’re not approving a lot of those people. So, you might be able to get in through the back door. For example, I got an email recently from one of my credit cards but I’ve had for a couple of years, touting at 15 months zero percent balance transfer offer for existing customers,” he said. “There are also some programs that Chase and Citi have, for example, that can extend a personal loan out of your existing credit card line. So if you already have an account with them, you might be able to take some of that credit card limit and repurpose it as a personal loan. That usually comes with a much lower interest rate, and it also comes with a more predictable payback cycle.”
So how should you juggle bills and responsibilities during this crisis time? Rossman believes your first step should be asking all of your lenders for a break because most of them are very forgiving right now. Then use your credit card when you have to, but be careful with it.
“Typically you want to prioritize necessities like housing for your medicine. Typically credit card bills for more towards the bottom of that list because it’s unsecured debt, you’re not directly putting your house on your car on the line," Rossman said.
Rossman added if you can ask for and receive a break, that may change things.
"I think that any money coming in like a stimulus payment or unemployment check, that needs to be thought out in this broader context as well.”
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