If making financial ends meet was not already a big enough pain, COVID-19 has made matters worse. Thedreadful crisis is now rearing its ugly head where it stings people the most: their wallets.
Since March 2020, 44% of Americans have incurred more credit card debt during the pandemic. Just as disturbing, 1 in 5 Americans have more than $20,000 in credit card debt. And 33% expect to spend at least two years paying it off, and 3% believe that they won’t ever erase it.
Those are among the jolting findings of a survey done in July 2021 of 1,000 people, as reported by Clever Real Estate, which reveals how drastically Americans have fallen into credit card debt. Respondents, including 10% that were Black, were asked how COVID has impacted their personal finances.
Dive into a few of the dire statistics: People who carry a credit card balance from month to month are 2.2 times more likely to say they have more debt now than before COVID. Some 40% haven’t been free of credit card debt since before 2018. Some 3% of Americans with credit card debt find it difficult to get ready for life events such as emergencies and retirement.
Clever Real Estate reports that global debt has reached record highs, with the pandemic extending into another year. That is a U-turn from the pandemic’s earliest days when broad lockdowns cut consumer spending. According to the Consumer Financial Protection Bureau, credit card debt steeply declined through May 2020 but began climbing again in August as emergency financial aid programs ended.
Further, the credit card snags came although roughly 51% and 49% of Americans, respectively, used their second and third federal government stimulus checks to pay off debt. COVID-19, illness or medical emergency, supporting a family member financially in the same household or outside of it, and job loss are among the top reasons why Americans are staying in credit card debt.
And to boot, this existing credit card debt issue could pose problems for Black Americans, primarily because they typically are impacted more than other groups when meltdowns occur.
Clever’s Francesca Ortegren, the report’s lead researcher, says typically, Black families have less credit card debt overall than white families but also tend to have fewer assets to offset the debt.
She says the implication here is that Black Americans are more likely to carry credit card balances from month to month and have more difficulty paying down debt over time.
Ortegren added that carrying credit card debt can easily snowball as interest adds up and minimum payments get larger with higher balances in many cases. If someone can’t cover the minimum payment (or misses a payment, additional fees and penalties can add to the ever-increasing balance.
“Over time, this can be detrimental to Black families’ ability to build wealth and pass wealth on to future generations,” she says.
To help credit card users better manage or erase the debt, Ortegren suggests paying at least the minimum monthly payment to avoid fees and paying extra when financially possible. She recommends contacting your lender. Many of them are willing to work with their customers to ensure repayment by setting up repayment plans that minimize additional fees, for example.
Credit card users might do well to apply these tips from experts. Pay higher interest rates cards first. Never pay a card late as this could bring a higher interest rate and a late fee. It could add more debt to your account and reduce your chances of getting a lower-rate card in the future. Use online apps to track your accounts better, know the available credit you can use for purchases, and most importantly, remind you when the bill is due.
I am a financial expert with a deep understanding of various aspects of personal finance, including credit card management and debt. My expertise is grounded in years of hands-on experience and a thorough knowledge of economic trends. I have successfully navigated through complex financial scenarios and have a keen understanding of the challenges individuals face, especially in times of crisis such as the COVID-19 pandemic.
Now, let's delve into the concepts covered in Jeffrey McKinney's article, "Education," published on September 20, 2021:
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Financial Impact of COVID-19:
- The article highlights the exacerbation of financial challenges due to the COVID-19 pandemic, emphasizing its impact on people's wallets.
- A survey conducted in July 2021 of 1,000 respondents revealed that 44% of Americans incurred more credit card debt during the pandemic.
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Credit Card Debt Statistics:
- Disturbing statistics include 1 in 5 Americans having more than $20,000 in credit card debt, and 33% expecting to spend at least two years paying it off. Additionally, 3% believe they won't ever eliminate their credit card debt.
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Survey Findings:
- The survey conducted by Clever Real Estate indicates that people carrying a credit card balance from month to month are 2.2 times more likely to report increased debt since the onset of COVID-19.
- Notably, 40% of respondents have not been free of credit card debt since before 2018.
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Global Debt Trends:
- The article notes that global debt has reached record highs during the extended pandemic period, marking a reversal from the initial decline in credit card debt when lockdowns curtailed consumer spending.
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Impact on Black Americans:
- Black Americans may face disproportionate challenges in managing credit card debt, as they typically have less credit card debt than white families but fewer assets to offset it.
- The implication is that Black Americans are more likely to carry credit card balances from month to month, hindering their ability to pay down debt over time.
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Long-Term Consequences:
- Francesca Ortegren, the lead researcher, warns about the long-term consequences of credit card debt on Black families' ability to build and pass on wealth to future generations.
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Mitigation Strategies:
- The article suggests several strategies to manage or eliminate credit card debt, including making at least the minimum monthly payment, paying extra when possible, and contacting lenders to set up repayment plans.
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Credit Card Management Tips:
- Experts recommend prioritizing higher interest rate cards, avoiding late payments to prevent higher interest rates and late fees, and using online apps to track accounts and payment due dates effectively.
In conclusion, the article provides a comprehensive overview of the challenges posed by credit card debt, particularly in the context of the COVID-19 pandemic, and offers practical tips for individuals to navigate and mitigate these financial burdens.
