Why Our Consumer Nature is the Only Reason that Hinders us From Paying Down our Debts
Debt is one of the issues that greatly riddles U.S consumers. As a matter of fact, it is common knowledge that one-third of the monthly income in American households is redirected to debt. Additionally, according to data collected by Northwestern Mutual’s 2018 Planning & Progress Study, they further spend more money on wants rather than needs.
According to the director of planning for Northwestern Mutual, Emily Holbrook, the need to have immediate wants satisfied is not worth the long-term detrimental effects that debts have.
Moreover, as per the records released by the Federal Reserve, the current total credit card debt has reached a high of $1 trillion. Additionally, the average interest reported for the given accounts was about 17 percent. This means that consumers are releasing about $100 billion as interest annually.
As per the report released last week, a survey was carried out targeting 2000 adults; and it showed that household debt is slowly becoming widespread and climbing as time goes by.
As a matter of fact, the number of consumers who reported they were debt-free dropped from 27 percent last year to 23 percent this year.
One of the major issues of this decrease is credit card balances. In fact, credit card balances actually equal mortgages as the highest reasons for debt, catapulting from 19 percent to 25 percent this year.
Plus despite the fact that nearly half of all the respondents mentioned clearing their debt as their major financial objective for 2018, it’s been observed that the average debt, minus the addition of mortgages, has increased by up to $38,000 this year from $37,000 the previous year.
Hence, for those who are planning to clear off their credit card debts, here are some tips that you can absorb.
Reorganize your repayment measures
There are a couple of features that you can look at to pay off your credit card debt.
The first option involves channeling a majority of your repayments to the card that currently accrues the most massive interest rate. In simpler terms, you can be regularly paying off the minimums on the cards that have lower rates as you direct any extra income to the debts that have the highest interests.
Once you have finalized the debt for the highest interests debited cards, you can move to subsequent cards with high rates.
Another strategy is to first work towards paying your lowest balances first. This will certainly help you gain momentum as you aspire towards finalizing the remaining debts and having them completed.
Consider any balance transfer options that you might have
If you happen to have a great credit score, you might be able to qualify for a balance transfer offer with low interest or even zero interest. In this case, the wisest thing is to take it.
While these sort of opportunities usually have a balance transfer fee, the introductory rate can run from anywhere between a couple of months up to a year, or even more. However, in the end, the remaining balance is then accrued with an interest at the given rate.
With this setup, not only do you escape high-interest rates being capped on the debt, but also it will help you pay the loan at a much faster rate.
However, to successfully pull this off, you’ll need to have some discipline and resolve. As a matter of fact, you shouldn’t access any of the old or new credit cards as this will only serve to lead you further into debt.
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