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In 2020, fewer Americans have applied for credit cards as the COVID-19 pandemic has kept people in, limited spending options quiet, and even forced people to be more proactive about debt. existing. And now, data from the start of the year shows that Americans have on average reduced the amount of credit card debt they carry.
According to TransUnion Q2 2021 Industry Outlook Report, credit card balances were down 4.1% year-on-year. The reduction in spending meant that consumers could spend more money on paying off revolving credit balances.
In fact, the average card balance among millennials has fallen to $ 4,277 this year, just below the 2020 average of $ 4,471, according to TransUnion. A similar decline can also be seen among Generation X and Baby Boomers; the average balance among Gen Xers has now fallen from $ 6,919 to $ 6,359, and the average balance among Baby Boomers has fallen from $ 5,777 to $ 5,317.
Gen Z was actually the only generation to see a slight increase in their average credit card balance in the first half of 2021 – the number increased slightly from $ 1,522 to $ 1,616.
No matter what generation you belong to, paying off revolving debt like credit card debt can positively impact your credit score, save you money on interest charges, and earn you money. free up more money to use for your other financial and lifestyle goals. . Read on for some of Select’s tips for managing credit card spending.
Create a budget to find out how much you can comfortably charge on your credit card each month
Creating a budget to map your spending can help you determine how much you can charge on your credit card while still paying the bill each month. Your budget doesn’t have to be very elaborate – the most important thing is that it works for you. For some ideas, check out our article on how to create a budget in five steps.
Try to aim to pay your credit card bill on time and in full every month. While most credit cards have a minimum required amount owed each month as payment, paying only the minimum means it will take you a lot longer to pay off your total balance – and it will ultimately cost you more. money because of the high interest charges that you will accumulate over the life of your balance.
Avoid using your credit card as an extension of your income
Of course, sometimes a credit card is the only way to finance something you really need, like food or travel expenses for work. But if you can, avoid treating your credit card as extra spending money. Sometimes it can be too easy to reach for your card for every purchase and before you know it you’ve already racked up a high balance. A a high balance over the amount of available credit you have can actually lower your credit score. And, of course, the higher your balance, the more you’ll spend on interest charges each month.
Some credit cards allow you to transfer the balance of an older, higher interest rate card to pay off the amount you owe at 0% interest for a specified period. Not paying interest means that more of your monthly payment will go to pay off the principal.
The time you have to make interest-free payments on a transferred balance will depend on the credit card, so be sure to read the terms carefully. The American bank Visa® Platinum card, for example, charges 0% interest on balance transfers for 20 months (after 14.49% – 24.49%). The introductory APR of 0% applies to balance transfers made within 60 days of opening the account.
However, they charge a balance transfer fee of 3% or $ 5, whichever is greater. But for more options, we’ve rounded up other 0% APR credit cards that can help you finance your debt or new purchases.
On the secure site of US Bank
0% for the first 20 billing cycles on balance transfers and purchases
Balance transfer fee
Either 3% of the amount of each transfer or $ 5 minimum, whichever is greater
Foreign transaction fees
While the overall average decline in debt balances is a promising indicator that consumers have prioritized credit card management, the TransUnion report also indicates that demand for new credit cards is on the rise as well. The number of new accounts increased quarter over quarter by 1.79% – in 2021, there are now 464.9 million credit accounts.
Select new add-ons (or first-time credit cards) that can help you earn money, enjoy travel benefits, invest for your retirement, and more. (See our methodology for more information on how we choose the best cards.)
Here are some of our choices:
But if you are looking for even more options, check out our full list of the best credit cards.
For pricing and fees for the Discover it® Secure Credit Card, click here.
Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.