There's More Than $3,000 in Credit-Card Debt for Every Man, Woman, and Child in America

By Sean Williams Markets Fool.com

It's pretty much no secret that we Americans love our credit cards. Like really, really love our credit cards. Multiple studies have found that approximately 70% of all Americans have at least one credit card. Utilizing census population data from 2015, that means that roughly 174 million adults in the U.S. have credit cards.

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And it's not just that people like having shiny plastic credit cards in their wallets. They like to use them... a lot!

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Aggregate credit card debt tops $1 trillion

According to recently released data from the Federal Reserve, aggregate credit card debt topped the $1 trillion mark for the first time since 2008. Credit-card debt now joins auto loans and student loan debt, which both previously topped the $1 trillion mark, respectively. If we use Worldometers.com's U.S. population count as our unofficial 2017 reading, this means more than $3,000 in credit card debt for every man, woman, and child in the United States. That's a staggering figure if you think about it.

Among those who actually have a credit card and carry a balance, the typical cardholder owes $16,601. That's a terrifyingly high number with credit card interest rates hitting an all-time high. Plus, if you're in the habit of just paying the minimum on your credit cards, a $16,600 balance would net lenders more than $11,000 in interest before it's paid off.

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Of course, it's not all bad news. "Credit card debt is rising quickly, but delinquencies are still really low," said Matt Schulz, CreditCards.com's senior industry analyst. Likewise, other industry analysts see the rising credit card debt figures as a positive sign for our consumption-driven economy. Consumers' willingness to take on big-ticket items is a sign that they're feeling more confident about their finances and the economy as a whole.

Coincidentally, consumer confidence also hit a 16-year high last month.

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It's time to start thinking about ways to pay down your credit card debt

However, one can't help but feel that things are a bit precarious here for those with credit cards. The Federal Reserve is in the midst of a monetary tightening period, meaning its federal funds target rate is expected to push higher. As it moves higher, variable interest rates on credit cards are expected to do the same.

According to Schulz, "Many Americans are doing a good job of controlling their debts, but eventually with big debts and rising interest rates, it's likely that something will have to give. I expect delinquencies to start rising more quickly in 2017."

This cautionary tale is your warning to be proactive about paying down your credit card debt now, long before the tide turns in the U.S. economy. Let's take a look at a few strategies you can consider that'll help you make some headway on what you owe.

1. Consider a balance transfer card

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One option to consider if you've racked up quite a bit of credit card debt is a balance transfer card. Opening a new credit card may allow you an interest-free period and, for a small-fee (usually 3% to 4% of the balance you're transferring), you may be able to transfer balances from existing cards onto your newly opened card. This should give you the opportunity to whittle down your principal balance owed. According to Schulz, some credit card companies are offering balance transfer cards with 21-month 0% APR balance-transfer windows.

Of course, there's a caveat to this exceptional offer: you need to be a good borrower. You'll be expected to pay your bills on time, because a late payment could mean the end of your interest-free rate period. You'll also want to have paid off your balance within the allotted interest-free timeframe to avoid potentially high interest fees.

2. Don't forget your credit basics

Secondly, it wouldn't hurt for consumers to brush up on their credit score basics. Remember, the higher your credit score, the more leverage you'll have with lenders in securing more offers and a better interest rate. Here are five core things to focus on when using a credit:

  • Pay your bills on time
  • Avoid using more than 30% of your total available credit
  • Keep good-standing accounts open for a long period of time
  • Only open new accounts when it makes financial sense to do so
  • Prove to lenders that you can handle both installment and revolving loans

3. Try budgeting

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It's a sad but true fact: a 2013 Gallup survey found that only a third of American households keeps a detailed monthly budget. Without a monthly budget, it becomes very difficult for consumers to optimally adjust their spending and saving habits, which makes paying off an average of $16,601 in credit card debt difficult, to say the least.

The good news is that budgeting software can be found online, and for free in most instances. In just 30 minutes a month you could have a workable budget that'll have you on track to saving money, which you can use to pay down your credit card debt.

4. Talk to your creditors

Another idea is almost so ridiculously simple that most Americans fail to think about it: talk to your lender about lowering your interest rate. If you have a long history of making your payments on time, and you have a good or excellent credit score, your lender will probably, more often than not, be receptive to lowering your interest rate.

For lenders, it's often costlier to spend money attempting to bring in new customers than it is to lower the interest rate for existing customers. What consumers should realize is they're considerably more valuable to credit card companies than they may realize, and they should use their worth to their advantage.

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5. Set achievable goals

Lastly, setting achievable goals will help you whittle away your credit card debt.

There are typically two approaches consumers can take: consolidate your debt onto a lower-interest rate card, or tackle one card at a time, regardless of interest rate. Consolidating can lower what you'll owe in interest, but it could also lead to a temporary decline in your credit score as you'll be piling your debt onto a single card and likely push its utilization rate way up.

Conversely, tackling one card at a time may not help lower what you'll pay in interest, but it can provide incremental boosts in helping you achieve your goal of being debt-free, as well as preserve or improve your credit score.

The time to be proactive about your credit card debt is now, America!

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