STATEN ISLAND, N.Y. — The cost of living for Americans has become increasingly expensive, with rising prices at the gas pump, in the food store, and just about everywhere else. So it’s no surprise that U.S. consumers racked up their credit card debt in 2021.
Credit card debt rose last year by $74.1 billion during the fourth quarter, resulting in a net increase of $87.3 billion, according to a study by the financial website WalletHub. This is nearly double the average annual increase in credit card debt over the past 10 years, which is just $48.5 billion.
The average household debt for New York City residents in 2021 was $15,760, with a total outstanding debt of $49,912,334,268 for the city, according to WalletHub.
Experts on WalletHub predicted that the cost of credit card debt will be steeper in 2022 as the Federal Reserve is expected to start raising interest rates this month. Experts predicted that the cost of existing credit card debt will rise by $1.6 to $3.2 billion in 2022, as more rate hikes are expected throughout the year.
While WalletHub stated that 33 million Americans will have more credit card debt by the end of 2022, there are ways to alleviate financial pressures by managing finances effectively. The finance website provided the following tips:
- Create a budget and stick to it. It is great to have an understanding of your spendings. Once you see where your money is going, you can reassess how you want to manage that. Make a list of your expenses, including debt payments, emergency fund contributions and other savings, and rank them based on priority. Cut loose ends if need be, and make sure you stick to your budgeting plan.
- Build an emergency fund. Setting aside money every week or month can go a long way, especially in times of need or unplanned joblessness. With patience, you can gradually save and have a safety net. Think of the ideal amount you would need to set aside to be secure if you were jobless for a year, and slowly build that emergency fund.
- Evaluate your job situation. If budgeting and planning your finances don’t help with your sense of financial security, start looking for other jobs in your field of interest that are paying higher rates. Do not be afraid to invest in your skills and make yourself more marketable, as long as it will be a worthwhile return!
- Repay your most expensive debt first. Focus on putting majority of your monthly debt payments on the balance with the highest interest rate first. Then make the minimum payment required on the rest of your debts. This way, your most expensive debt will be paid off quicker, allowing you to spend less on interest.
- Improve your credit. Once you improve your credit, your cost of debt will change dramatically. This will allow you to pay off your debt quicker. Better credit also allows for better opportunities to find a job or a place to live.