Managing credit card use in times of rising inflation
FARMINGTON HILLS, MI (August 11, 2022) — It’s back-to-school shopping season. School supplies, clothes, uniforms, sports and club fees and other school-related expenses can send your budget soaring. And these days, inflation is making those costs higher yet.
A recent back-to-school survey from Deloitte shows that parents plan to spend $661 per child, on average, for back-to-school shopping this year, up 8% from 2021 and 27% from 2019.
Clothing and accessories lead the increase, costing 18% more this year on average. School supplies cost 7% more.
In a time of rising prices, credit cards can feel like a tempting option to bridge your budget gap and pay for everyday expenses. But carrying a balance each month can torpedo your finances – especially as interest rates rise.
In the second quarter of this year, US household debt surpassed $16 trillion for the first time ever, according to the New York Federal Reserve. And over the past year, credit card debt has jumped by $100 billion, or 13%, the biggest percentage increase in more than 20 years.
Not surprisingly, the culprit seems to be inflation, as prices continue to rise at the fastest pace in more than forty years.
“When things cost more, if you’re living on the edge you might turn to credit cards to make ends meet,” said Katie Bossler, GreenPath Financial Wellness advisor. “This approach may solve a problem short-term, but can cause financial difficulty long-term.”
GreenPath Financial Services, a non-profit financial counseling agency, advises clients to keep tabs on their spending, especially in times like these.
If someone finds they’re using credit cards more than they used to because of inflation, it’s important to get back to the basics, Bossler said. “We recommend people take a look at what’s coming in and going out. It’s important to build a budget, come up with a strategy, and stay focused on your goals.”
There are three things to keep in mind when using credit cards, said Bossler.
1. Avoid missing payments.
If you think you might fall behind on a credit card payment, contact your credit card issuer. It’s often possible to change your due-date around or they might have a hardship program that could work for you. If you let a card fall 30 days late, you may be reported to the credit bureau. You want to avoid that, if possible.
2. Cash Advances are not your friend.
Cash advances are the most expensive way to borrow money as interest rate charges begin immediately for most cards, and usually at a higher APR (often more than 20%). Think of alternatives such as using your credit card to pay your bills direct. It’s not ideal, but better than securing a cash advance.
3. A second set of eyes can help you focus.
“GreenPath offers free financial counseling sessions to help people better understand their money habits, establish a budget and explore ways to reduce spending,” said Bossler. “And, we can help you find the most efficient way to pay back your debt.”
GreenPath and its resources are excellent sources of information, no matter where you find yourself on your financial journey. Consumers can contact them at 800-550-1961 for a free counseling session.
About GreenPath Financial Wellness
As one of the largest financial counseling agencies in the nation, for more than 60 years, GreenPath Financial Wellness has assisted millions of people with debt and credit management, student loans, homeownership, and foreclosure prevention. Headquartered in Michigan, GreenPath and its affiliates work directly with individuals and 580+ credit union, bank, retirement/insurance and employer partners across the U.S. from more than 20 locations and through phone access and online tools. GreenPath is a member of the National Foundation for Credit Counseling and is accredited by the Council on Accreditation. The GreenPath family of companies now include CONSUMER, Homeownership Preservation Foundation (995-HOPE), Clarifi, and Rural Dynamics, Inc. To learn more, visit www.greenpath.org or call 800-550-1961. Follow the nonprofit on Facebook and Instagram @greenpathfinancial and on Twitter @GreenPath.
