As the economy improves, so does consumer sentiment. Along with a rise in spending confidence comes a rise in credit card debt.
Household debt balances continued to grow in 2016, up to $12.35 trillion in the third quarter -- which was only 2.6 percent below the peak reached in 2008. While this data includes mortgage debt, another study claims that more Americans are ensconced in credit card debt now than they were before the recession. Today, the average household with credit card debt owes more than $16,000.
Paying down debt is one of the most common money-related New Year’s resolutions, and one survey found that people who make financial resolutions are more likely to improve their financial situation. In an effort to keep New Year’s resolutions, it may be a good idea to tuck away the credit card when possible.
Remember, just because you can afford something isn’t necessarily a good reason to buy it. If you have concerns about how you are spending your current assets, please contact your financial professional about helpful budgeting tools.
Also remember that as the Federal Reserve Bank raises interest rates, variable interest rates charged by credit cards are likely to increase as well. This means your monthly minimum payment may go up, and any credit card balances you hold could also begin increasing.
It’s important to view credit cards as a tool, not a crutch. Use them to pay for the things you can afford, and only when using a credit card affords you an opportunity you wouldn’t get by using cash. For example, today’s high-end credit cards offer considerable perks in terms of travel rewards and VIP conveniences. According to a survey by Luxury Card, upscale cardholders who utilize credit card concierge services enjoy having someone else do their legwork for accommodations and reservations.
Of course, the annual fees for these types of cards can be significant, so be sure you travel or spend enough to make them worth your while.
Interested in reading more? Here are some articles that may be of interest to you:
[CLICK HERE to read the article, “US Consumer Confidence Climbed to 15-Year High in December,” from FoxNews. Dec. 28, 2016.]
[CLICK HERE to read the article, “Household Debt and Credit Report,” from Federal Reserve Bank of New York. November 2016.]
[CLICK HERE to read the article, “Americans Are Now in More Debt Than They Were Before the Financial Crisis,” from MarketWatch. Dec. 23, 2016.]
[CLICK HERE to read the article, “Tackle These Top 5 Financial Resolutions In 2017,” from Forbes. Dec. 22, 2016.]
[CLICK HERE to read the article, “What the Fed Rate Hike Means for Your Personal Finances,” from Bloomberg. Dec. 14, 2016.]
[CLICK HERE to read the article, “Get the Exclusivity You Desire with These Luxury Credit Cards,” from BusinessInsider. Nov. 30, 2016.]
We are an independent firm helping individuals create retirement strategies using a variety of Raymond C. Lantz, Jr. is the president and founder of USA Wealth Group, Inc. Ray has many years of experience advising clients in retirement and sophisticated tax planning strategies, multi-family and commercial real estate projects, and legacy planning. Ray is a graduate of Clark University, holds a law degree from Boston College, and a master of laws in taxation from Boston University. You can hear him every Sunday on Money Wise with Ray Lantz on WBSM 1420AM or on the Radio Pup app.