Credit card debt is not something new to most Americans. In fact, according to Experian.com, 75% of adults carry a balance on their credit accounts. With that in mind, credit card debt has started to drop over the past year.
Facts about credit card debt
Debt payments are typically included in most budgets. According to Experian, the average balance on store cards is $2,044. That is just store cards; however, the average balance on total credit cards is $5,897. This is down 11.04% from 2019, when average credit card debt in the U.S. was $6,629.
Possible explanations for this trend
While the past year and a half have been stressful, with the world being in the midst of a pandemic, there are some possible reasons for the reduction in debt levels. Many families received stimulus checks and may have used those extra funds for paying off debt. We also experienced limited traveling and many families were not going out for entertainment or meals, decreasing spending. There is no way to know for sure why the debt trend changed, but it is a great thing to see.
Best practices to eliminate debt
There are several methods to help eliminate debt. Here are a few tips to help.
The Snowball Method - This method consists of listing all of your debts from smallest to largest amounts owed. Make the minimum payments on all but the smallest. When you pay the smallest debt off, you can focus those extra payments on the next smallest. Continue this process until all your debt is paid off.
The Avalanche Method - This method consists of ordering all of your debts by their interest rates. Make at least the minimum payment on all your debts, but make extra payments on the debt with the highest interest rate. As loans are paid off, allocate the extra payments to the loan with the next highest interest rate.
All in all, as long as you are making payments and avoiding using the credit cards to rack up more debt, you’ll make progress in taking care of your balances.