One of the biggest concerns people have more than their health at the moment is their increasing credit card debt. This comes at a time when the health crisis has caught a lot of Americans off-guard and unprepared. As businesses try to gain a solid footing back into their bottomline, they had to make drastic operational cuts. This included reducing salary and even letting people go.
As a result, people are more reliant on whatever savings they were able to set aside. That is if they have an emergency fund to dip into. Pew Social trends share that for lower-income families, only about 23% have an emergency fund. They are some of the hardest-hit sectors at the moment and the fact that they do not have reserve funds makes it more challenging for them.
As a result, increasing credit card debt is seen with people who don’t really have much to begin with. Since they do not have a lot of savings to rely on and their income is affected by the pandemic, they are left to rely on their credit. Slowly, credit cards are reaching their credit limit just to be able to cover basic household needs.
If you have reached the point where you are already worried about your monthly statements, you need to take control of the situation. There is only so much you have control over but you need to get ahead of your credit card payments. Here are a few tips to help you manage your finances when you are trying to juggle card payments.
Assess your household budget
If you want to curb an increasing credit card debt, the first thing you need to look at is your household budget. This is one of the most important financial tools you need by your side if you want to manage your finances better. For this to be effective, you need to put in the work as well. It needs to be as comprehensive as possible.
With this in mind, you might start to look at complex formulas to help you stay on top of your budget. If you start with something you cannot understand, you can end up with a strong dislike in budgeting your money. You need to start with a very basic and straightforward budgeting model. One that has your income on one side and your expenses on the other.
Remember that the main goal of your budget is to give you an overview of your financial situation. The goal is to have your income cover your expenses so you do not get into debt. This is what you are trying to manage since the pandemic has affected a lot of people. Your income could be impacted which is the reason for your card reliance.
Check your income sources
Increasing credit card debt can be caused by a lot of factors but one of the biggest reasons for this is your income. The health crisis could have put you on furlough, reduced hours at work, or even let go of your jo. As a result, your income has taken a hit and you are running low on funds to cover and pay for your expenses. This is the reason why you are using credit cards to make ends meet.
It is also possible that you simply cannot control the way you use your credit cards. This impulsive buying behavior can lead to unmanageable debt. You could be spending faster than you earn money which puts you in the red every time. That being said, you need to check on all your sources of income if you want to get ahead of your card debt.
This would be easier if there are no changes in your work situation but if there is, you need to revise your budget immediately. Once you do, it gives you an idea of how to scale down with your expenses as well. It would be very difficult to start cutting down on cost items when you do not even know what your total income is.
List down all your credit card debt accounts
It helps also if you can create a list of all your credit card debt payments. Increasing credit card debt can be the result of either one lender or a number of creditors. This is why it is important to make a list of all the lenders you have to pay back every month. It is a challenge because you are forced to face your problem head-on.
There are some people who choose to shove their credit card statements in a drawer convinced that they will get to it in a few days. The problem is it remains there for months until collection calls start to come in. It helps to set a schedule and a time to get to your statements and go through them one at a time.
You need to list them down for a number of reasons. One is to have a clear picture of how much you owe. It also helps to have a ready list of contact information for your lenders. If you list your credit card debt, you will have a clear picture of how much your balance is for every creditor and even the interest rates as well as due dates for them. All these pieces of information will come in handy.
Reach out to your lenders
Contact details for each of your lenders are important because one of the things you need to do is reach out and talk to your creditors. If you are looking at increasing credit card debt with no income to support the payments, you will be in unmanageable debt soon. This is a good time to be proactive and talk to your lenders about your situation.
For one, they might have programs in place to help borrowers just like yourself deal with financial hardship. CNBC explains that there are card issuers who have announced programs to assist their customers during the pandemic. You might not know that your lender already has a program in place if you do not ask.
If not, they might be open to working with you in reaching an agreement to help you with your situation. There are some lenders who will agree to lower your monthly payments, hold off on the interest payments, or even give you a payment break. The important thing is to be honest with your card issuer and ask if they can help you out.
Go over your repayment options
Details about your credit card debt is also important if you are already looking at repayment programs. If you want to pay down the smallest balance first, you need to identify which account it is. If you choose to focus on the account with the highest interest rate, your list would come in handy. Debt consolidation is also helpful especially if you get to use a 0% card to do it. You get to save money, make lower payments and be able to focus on one payment for most of your credit card debt.
Dealing with increasing credit card debt is not an easy task especially with the pandemic affecting household finances. But you need to get ahead of this problem by taking a proactive approach and finding solutions before the problem becomes too big to manage.
