As the economy improves, so does consumer sentiment.1 Along with a rise in spending confidence comes a rise in credit card debt.
Household debt balances continued to grow in 2016, up to $12.35 trillion in the third quarter — which was only 2.6 percent below the peak reached in 2008.2 While this data includes mortgage debt, another study claims that more Americans are ensconced in credit card debt now than they were before the recession. Today, the average household with credit card debt owes more than $16,000.3
Paying down debt is one of the most common money-related New Year’s resolutions, and one survey found that people who make financial resolutions are more likely to improve their financial situation.4 In an effort to keep New Year’s resolutions, it may be a good idea to tuck away the credit card when possible.
Remember, just because you can afford something isn’t necessarily a good reason to buy it. If you have concerns about how you are spending your current assets, please contact your financial professional about helpful budgeting tools.
Also remember that as the Federal Reserve Bank raises interest rates, variable interest rates charged by credit cards are likely to increase as well.5 This means your monthly minimum payment may go up, and any credit card balances you hold could also begin increasing.
It’s important to view credit cards as a tool, not a crutch. Use them to pay for the things you can afford, and only when using a credit card affords you an opportunity you wouldn’t get by using cash. For example, today’s high-end credit cards offer considerable perks in terms of travel rewards and VIP conveniences. According to a survey by Luxury Card, upscale cardholders who utilize credit card concierge services enjoy having someone else do their legwork for accommodations and reservations.6
Of course, the annual fees for these types of cards can be significant, so be sure you travel or spend enough to make them worth your while.7
Content prepared by Kara Stefan Communications
1 FoxNews. Dec. 28, 2016. “US consumer confidence climbed to 15-year high in December.” http://www.foxnews.com/us/2016/12/27/us-consumer-confidence-climbed-to-15-year-high-in-december.html. Accessed Dec. 28, 2016.
2 Federal Reserve Bank of New York. November 2016. “Household Debt and Credit Report.” https://www.newyorkfed.org/microeconomics/hhdc.html. Accessed Dec. 28, 2016.
3 Maria Lamagna. MarketWatch. Dec. 23, 2016. “Americans are now in more debt than they were before the financial crisis.” http://www.marketwatch.com/story/this-is-how-much-credit-card-debt-americans-racked-up-in-2016-2016-12-20. Accessed Dec. 28, 2016.
4 Andrew Josuweit. Forbes. Dec. 22, 2016. “Tackle These Top 5 Financial Resolutions In 2017.” http://www.forbes.com/sites/andrewjosuweit/2016/12/22/tackle-these-top-5-financial-resolutions-in-2017/#7bf7b9411f1e. Accessed Dec. 28, 2016.
5 Ben Steverman. Bloomberg. Dec. 14, 2016. “What the Fed Rate Hike Means for Your Personal Finances.” https://www.bloomberg.com/news/articles/2016-12-14/what-a-fed-rate-hike-means-for-your-personal-finances. Accessed Dec. 28, 2016.
6 BusinessInsider. Nov. 30, 2016. “Get the exclusivity you desire with these luxury credit cards.” http://www.businessinsider.com/sc/credit-cards-for-exclusive-luxury-experiences-2016-11. Accessed Dec. 27, 2016.
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