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March is National Credit Education Month, and according to data from credit reporting giant Experian, Georgia residents have one of the highest credit card debt balances in the nation, with an average $6,569 in credit card debt per resident.
According to a February article by the Consumer News and Business Channel ( CNBC), Georgia ranks ninth in the country for highest credit card balances. Alaska is ranked on top with $8,026 in credit card balance per resident, while at $4,774 Iowans have the lowest average balance. With inflation, total credit card debt has reached a record $930.6 billion.
According to Mary Jo Terry, a managing partner at refinance company Yrefy, individuals with credit cards have seen a significant increase in their balances and 60% are unable to pay off credit card debt in full each month, moving balances from one month to the next. This has to do with the inflation of costs related to necessities like food, gas, etc.
“Nationally, individuals are experiencing an increase in inflation and increasing variable interest rates. Their credit card debt repayment is also being affected by variable mortgages or student loan debt,” said Terry. “Unfortunately, Georgia has a higher than average per student loan debt, and inflation costs are leading to credit cards being used more for necessities, rather than fun.”
Credit card debt may be put off being paid due to the increasing stress of the debt or the number of outstanding cards owned by an individual. Credit card owners carrying balances from one month to the next is up 10% from last year.
“The first step to conquering credit card debt is setting a budget. This includes noting what someone spends their money on, counting subscriptions, and how much money is being brought in each month,” said Terry. “There are many free budget apps that can help. Remember the word free is key.”
When creating a budget, someone should identify discretionary spending. Discretionary spending is defined as nonessential spending. During the budgeting process, every credit card should also be written down alongside its balance and its interest rate.
“The point of this is to identify the highest interest rate credit card and the highest balance so someone can identify their credit card monthly minimums. Credit card monthly minimums should be paid, at the least,” said Terry.
Once the identifiers are determined, the next step is to pick a method to pay the debt back. According to Terry, if someone has a significant amount of debt, often credit cards will allow the transfer of balances from other cards to get a 0% or low intro rate for a given number of months. The transfer will have fees involved with it and it will be up to the individual’s discretion whether that transfer with the accompanying fees is worth doing.
Another method of payback is the avalanche method. Take the credit cards with the highest interest rates and pay those off first. With the high interest rate, the goal is to get the credit card paid down so less interest is being paid.
“Pay the minimums on other cards and pay as much as you possibly can pay on that high-interest rate card. Also, keep in mind that you can pay more than once a month, so if you have extra money each week, pay that extra money each week,” said Terry.
The final method is the snowball method. This method is driven by a sense of accomplishment through paying off the smallest balance loans first. Once a card is paid off, it should be put out of reach. During this method, continue to pay the monthly minimums, and then, after paying off a card, take the amount of the previous balance and apply it to the next card.
“By the end, you’ve snowballed. You never stop paying the minimum and are adding to what you’re paying each time. Never allow yourself to fall below the last balance,” said Terry.
Throughout the process of repayment, look how to cut items out of the budget and look for bundles and ways to save money. According to Terry, one fact people often do not know is that if someone has been a long-time cable provider or telephone provider, they can call and ask for a loyalty discount. It is important to get these discounts, electronic coupons and website rebates.
“Take all of that money saved and put it towards your credit cards. The goal is to create a debt-free situation, as well as create a savings account for irregular expenses,” said Terry. “You should have at least 90 days of savings.”
The United States is in a rising interest rate market. Credit card interest rates will continue to rise, so waiting will only elevate the risks.