A Northwestern Mutual study of Americans and debt found that millennials reported carrying more credit card debt than student loan debt. More specifically, Consumer Affairs found that two-thirds of all millennials carry credit card debt, while only a little over one-third are saddled with student loan debt. Also, 22 percent of millennials are unaware of the interest rates that their credit cards carry.
The Northwestern Mutual study used the Pew Research definition of a millennial, which is a person who was born between the years of 1981 to 1996. Currently, millennials are ages 23 to 38.
At Wink Capital, a firm that specializes in providing solutions for debtors, we are often asked what can be done to help those who are struggling under heavy credit card debt. The following explains the foundations of the problem and provides solutions.
Stuck Between a Rock and a Hard Place
According to CNBC, many millennials are not in financial difficulty due to being big spenders. Instead, they cite problems such as the ridiculous rise in the cost of higher education and the fact that wages have not increased for most people in any substantive manner in the last 40 years. Things got decidedly worse for people during the Great Recession when many lost their jobs.
The Problem With Credit Card Debt
Even more so than in the past, credit card debt is a huge problem for those that carry a monthly balance. The problem is that the average credit card rate is close to 18 percent. With interest rates so high, consumers get stuck primarily paying the interest each month and are not able to pay down the balance. In fact, the Northwestern Mutual study found that, across all age cohorts, a full quarter of U.S. consumers believe they will die indebted.
Why Do Something About Heavy Credit Card Debt?
In the last recession, many people lost their jobs. Then, they were unable to pay their credit card debt. When they next applied for any kind of credit, they found that they were saddled with exorbitantly high-interest rates. This leaves people terminally indebted. The time to act is now, before the next recession hits, in order to regain financial stability.
Also, millennials who are spending so much money on high-interest payments for credit are not able to save for their retirements.
Solutions
Balance Transfer Card –
In order to step out of heavy credit card debt, you need to reduce your interest payments. One method of doing this is to obtain a zero-interest, balance transfer credit card. This technique will work if you can pay down the debt during the zero-interest-rate window, usually 12 to 18 months.
Debt Consolidation Loan –
If the debt will take longer than 18 months to pay off, it makes more sense to apply for a debt consolidation loan. A debt consolidation loan is a personal loan that will pay off your credit card balances, giving you one payment to make each month at a lower interest rate. The debt consolidation loan will provide you a pay-off date.
Since you will be paying less each month for these debts, you will also have more room in your budget in order to begin saving for a rainy day fund. Both the debt pay off and the rainy day fund will provide you more financial security and stability.
The main mistake most people make about heavy, high-interest debt is waiting until things get really bad and they begin having to miss payments. If you are struggling under heavy credit card debt, call Wink Capital today. We have solutions to help you regain your financial stability and peace of mind