Hoboken, New Jersey, Dec. 29, 2020 (GLOBE NEWSWIRE) -- According to a new study from LendEDU, a personal finance company based in Hoboken, New Jersey, 63% of Americans have taken on a record amount of credit card debt due to both holiday shopping and the pandemic recession.
This includes 75% of Americans who have lost their jobs because of the coronavirus pandemic and are still unemployed. The study from LendEDU also found 55% of consumers are losing sleep over the amount of credit card debt they have amassed due to holiday shopping coinciding with an economic crisis. For reference, LendEDU found 2020 holiday shopping combined with the pandemic recession led to an average credit card debt balance of $2,150.
The full LendEDU study can be found here.
So, how can a consumer go about repaying his or her credit card debt from the 2020 holiday season?
LendEDU explains a few strategies below.
Balance Transfer Credit Card
A balance transfer credit card can be a great way to repay credit card debt, as this method will transfer all of your credit card debt onto a new balance transfer card that ideally has a 0% introductory APR for at least three months. If you transfer your credit card debt onto a balance transfer card with a 0% introductory APR, interest will not be charged to your debt balance which means 100% of your monthly payments can go towards repaying the principal balance. If you decide to employ this strategy, it's important to find a balance transfer card with a 0% introductory APR for at least 3-6 months, while also being aggressive with your monthly payments during the introductory period. By doing both, you can fully take advantage of using a balance transfer credit card to repay credit card debt efficiently.
Debt Consolidation Loan
A debt consolidation loan could also work as a credit card debt repayment strategy if your holiday credit card debt is spread out between multiple credit cards that have high-interest rates. A debt consolidation loan, which usually comes from a personal loan lender, will consolidate your various debts onto one personal loan that can make repayment easier. The possible benefits include only having to make a single monthly payment for the debt consolidation loan instead of multiple payments for multiple credit cards, in addition to possibly securing a lower interest rate which could save some money. Additionally, a debt consolidation loan may extend your repayment period which could lower monthly payments.
Debt Avalanche Method
Another credit card debt repayment strategy is not an actual product like the first two, but rather an actual method to hopefully repay debt quicker. The debt avalanche method involves using all of your additional funds to first repay the credit card debt balance on the credit card with the highest interest rate. Once that debt balance is paid in full, you then move on to the credit card with the next highest interest rate. By repaying the debt on the highest-interest credit cards first, the debt avalanche method rids you of the costliest debt right off the bat, which should allow you to save the most money over the long run.
Credit card debt is not only a financial burden but a mental one as well, according to the LendEDU report. Because of its significant negative impact, credit card debt needs to be repaid as quickly as possible to get back on track towards financial freedom. The only way to repay credit card debt efficiently is to understand both your debt and your options for repayment as this knowledge will give you the best chance at finding the best repayment strategy for your specific needs.
To read more about debt repayment and your options, visit LendEDU.