Personal finance

Will Credit Card Debt Ever End?

Just when I thought maybe the pandemic had made many Americans realize, when they had less to do and spend money, that they could in fact live without a lot of unaffordable “wants”. and the resulting credit card debt, WalletHub.com released this report, based on its recent survey.

“After a record year for credit card debt reduction in 2020, US consumers are once again adding new credit card debt by the billions, racking up $ 45.7 billion in the second quarter of 2021. C This is an all-time record for credit card debt added in the second quarter of the year, and WalletHub now predicts consumers will add a total of $ 100 billion in debt in 2021. ”

These quotes from Jill Gonzalez, a WalletHub analyst, should make everyone think twice, but will they?

Why Are Credit Card Debt Levels On The Rise Again?

“Credit card debt levels are rising again as the economic uncertainty caused by the coronavirus pandemic has subsided. People are reintegrating into society and making up for lost time by living fully, even though they cannot quite afford it. The fact that credit card debt has increased dramatically isn’t too surprising, although it’s unclear whether this will be a momentary reaction to the unique conditions caused by COVID or the restart of the drift. long-term consumers towards financial instability. ”

Why are debt levels rising faster today than before the pandemic?

“Debt levels rose 32% more in the second quarter of 2021 compared to the same quarter in 2019 as consumer enthusiasm exceeds fundamentals. Many of us are not as full as we might be feeling right now, but we are still spending like there is no tomorrow. The starting point also matters. After the start of the pandemic, consumers reduced credit card debt to levels not seen in decades, and now we are seeing pent-up demand in action. ”

Didn’t consumers learn from their pre-pandemic financial mistakes?

“The $ 45.7 billion increase in credit card debt during the second quarter of 2021 indicates that consumers have learned little about sustainable spending from the pandemic. The fear people had of running out of money for food and shelter, not to mention other bill payments, was overcome by enthusiasm at the prospect of post-pandemic life.

Related to another subject, using cash as much as possible, I had a wonderful experience last week. I was at Tom Wahl’s in Fairport for lunch with my grandson. We were served by Gabriellis, an enthusiastic and charming young lady with a great personality. I paid in cash, of course, including the exact change in my wallet. She said: “I also have a wallet, and everyone in my family too, because we pay as much as possible in cash.” She takes a year off and works to save money. There is hope for more people using cash!

Continuing, metaphorically, on the topics of credit card debt and the use of cash, I can’t help but think that sometimes we should take the cards out of the federal government and make it pay new cash. “wanted” programs. The administration says it can fund the many programs covered by the $ 3.5 trillion human infrastructure bill by raising taxes for the rich and corporate.

For some of the programs that to many Americans seem less urgent, why not ask the government to tax, to prove that it can collect the money needed, save it, and then fund the program with that “money saved.” ? ”

He is not proposing that the federal government should operate on a balanced budget basis, which many Americans have proposed. It’s just that for some programs they actually have to be paid so that the national debt doesn’t go up for them.

Following up on the topic of savings, we discussed how the pandemic has shown the importance of having savings in an emergency and that many Americans do not have enough savings in the event of an emergency. emergency. Recently, the Gist by Finny reported this encouraging news on the subject: “More and more employers are starting to explore the idea of ​​offering savings benefits to their valued employees. In a recent Willis Towers Watson poll, 26% of 464 participants said they offer emergency savings as part of their retirement benefits, and 19% said they are considering or heading for it. In addition, “several bills aimed at making provisions for employers and employees in the field of savings have also been introduced recently. The benefits would include things like making it easier for employees to sign up for emergency fund plans, more tax-free access to 401,000 contributions for emergencies, and even automatic savings focused on tax refunds.

On a final topic, I have to be a presenter of a program for mothers who want their teenage daughters to learn important life skills and other skills. One of the topics of my interview will be why you should learn about personal finance and teach your kids about it.

Here are three of my 10 reasons (the other seven will be in the next column):

1. Eight of the top 10 stressors in life, the last time I checked, were money-related, including being the # 1 cause of divorce, with 72% of Americans admitting they were. worried about their finances at work at one point or another.

2. Employers, landlords and others check credit because people with debt issues don’t perform as well (due to stress and time spent dealing with those issues) so people are wasting all kinds of things. things because of bad credit, like jobs, promotions, apartments, etc.

3. Due to incredible marketing, we now live in a “Debt is OK” society, but the interest you pay on debt (like credit cards, car loans seven years and older) means that you will pay more for everything you do. and buy – so you should avoid and minimize debt as much as possible.

John Ninfo is a retired bankruptcy judge and the founder of the National CARE Financial Literacy Program. Find his previous weekly columns at mpnnow.com/search?text=Ninfo.


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