ST. PETERSBURG, Fla. — Whether it’s a mortgage, car payment or most commonly, credit card, most adults owe someone or some bank, money.
7 in 10 adults hold personal debt and on average, Americans are $96,000 in the red. The problem is continuing to grow. According to a new survey from Creditcards.com and YouGov, 72% have added to their debt over the past year, and largely attribute it to inflation and rising interest rates.
“I don't want to hear it, you don't want to hear it, but we have an unhealthy relationship with our credit cards, even if you're paying it off every month,” Kristin Ahlenius, Education Director with Your Money Line, a company that helps people find financial wellness said.
While things are getting worse, there are ways to try and start getting on top of the problem, bettering your financial future.
“A really common method is the ‘snowball’ or the ‘momentum’ method, doesn't really matter what you call it, where you pay your debts from smallest balance to largest balance. And that's great. Behaviorally, it works for so many people,” Alhenius said.
It often works for people, she says, because they start to feel a sense of accomplishment by knocking out each debt they owe, and it’s easy to see progress is being made.
Say you pay $50 a month on one credit card, once you pay off that balance, roll that $50 into boosting your payment on another card.
Ahlenius says for more analytic people, consider focusing on the debt with the highest interest rate and paying off as much as you can on those before taking care of smaller debts, saving you money in the long run.
If you are holding debt on cards with extremely high-interest rates, analysts with creditcards.com suggest you can also consider finding a no-fee balance transfer card with a lower interest rate, or those with good credit could save by getting a personal loan.
Keep in mind those payments are locked in, so you can’t, for example, choose to pay less on it than required one month, because you have other bills to take care of.
Though it’s not so much which method you take, but more so you find any method that works for you.
“I think being a little introspective, and really identifying 'what is my goal?' I think that's the method to choose,” Alhenius added.
When it comes to making new purchases this year, maybe hold off on big splurges and recognize, most of us have an unhealthy relationship with a piece of plastic.
“Really examine your relationship with your credit card. Do you really know where the money's going? Because unfortunately for most of us, that's not the case. And that's not to fault anybody. That's just who we are as people and it's about being more aware.”