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Money Matters Thought Leadership

Credit card debt is climbing. You can do something about it.

Key steps you can take now to secure your financial future

Consumer credit card debt in the U.S. has rapidly grown over the past year as inflation continues to hit the wallets of everyday Americans. 

Primerica’s most recent quarterly survey found that middle-income households across the U.S. are increasingly racking up the balances on their credit cards as they try to cope with the higher cost of living. 

More than one-third (37%) of respondents said they are taking on more credit card debt, and about one-fifth (21%) indicated they are making only the minimum payment on their balance each month.

“Financial stress brought on by rising credit card balances also has more families than ever before making only the minimum payments on their credit cards,” said Glenn J. Williams, CEO of Primerica. “With this and the cost of living continuing to rise, it is particularly important for families to get expert financial guidance to help mitigate the impact of this rising debt.”

In total, Americans’ credit card debt sits at $88.7 billion as of the second quarter of this year, according to the New York Federal Reserve Bank. That represents a 13% increase since the second quarter of 2021, the largest cumulative increase in more than 20 years.

Even though many Americans are taking proactive steps to adjust their spending habits — 75% of respondents in Primerica’s survey said they are cutting back on non-essentials — it hasn’t been enough for everyone to avoid taking drastic measures to stay afloat in the current economy. 

Nearly half (47%) report cutting back or pausing on saving, and about one-third (34%) are tapping their savings to deal with the rising cost of living. Such moves should always be a last resort because saving today will pay dividends later in helping to secure your financial future thanks in part to the power of compounding interest. 

Before you stop investing in your future, let’s take a look at key ways to tackle that credit card debt now rather than later.

  • Create a strategy to pay off debt: The time-proven method of debt stacking is a good place to start. You begin by making consistent payments on all your debts, while also not taking on any additional debts. By taking into account the interest rate and amount of debt on each of your accounts, you pick a target account you want to pay off first. When you pay off the target account, you roll the amount you were paying toward your next target account. As each debt is paid off, you continue this process. When you finish paying off all your debt, you can apply the amount you were paying on your debt toward creating wealth and financial independence.
  • Take on additional work: Inflation may be high, but the job market continues to remain hot as well, meaning there are opportunities to take on additional work or to look for better paying jobs to bring in extra cash to help you weather this period. You’ll be in good company, too, as 38% of respondents in Primerica’s most recent survey said they’d be looking to pick up another job. 
  • Remember, it’s all cyclical: What goes up must come down and the reverse is also true, especially when it comes to the market. The market fluctuates over time, and this down period won’t last forever. 
  • Avoid dipping into retirement account, if possible: It’s crucial that you avoid dipping into your retirement savings if at all possible. In fact, you should try to keep your monthly contributions about the same during this period. Doing so will help you reap the rewards when the market swings upward once again and set you up for success in the long run.

Even in the best financial climate, managing personal finances can feel overwhelming, and you may feel like you don’t even know where to start. That’s where talking to a financial expert can be a big help. These professionals know the ins and outs of the market and personal financial management, and they’ve helped many others overcome their financial challenges over the years to reach their financial goals. Having a financial coach in your corner may give you that extra confidence boost you need to develop a game plan for your financial future.

Primerica is a leading provider of financial services to middle-income households in the United States and Canada. Licensed financial representatives educate Primerica clients about how to prepare for a more secure financial future by assessing their needs and providing appropriate products like term life insurance, mutual funds, annuities, and other financial products. Primerica insured over 5.7 million lives and had over 2.7 million client investment accounts as of December 31, 2021. Primerica was the #2 issuer of Term Life insurance coverage in the United States and Canada in 2021 through its insurance company subsidiaries. Primerica stock is included in the S&P MidCap 400 and the Russell 1000 stock indices and is traded on The New York Stock Exchange under the symbol “PRI”.

 

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