ORLANDO, Fla. – Though 2020 was a year many would rather forget, one promising trend that’s bled into this year is the rate at which people are paying down debt.
WalletHub’s finance researchers crunched the numbers and learned people in the United States paid off $82.1 billion in debt in 2020 alone. Data shows people haven’t slowed down much when paying off their debt either.
Recommended Videos
But it’s not all good news.
The country collectively owes nearly $900 billion to credit card companies. WalletHub goes as far as to call it a national problem. When averaged by household, it comes out to $7,519, according to finance experts. WalletHub predicts that by the end of 2021, consumers would add $60 billion to the collective balance since the economy continues to reopen through the coronavirus pandemic.
After comparing credit card debt in 182 major metropolitan areas, Orlando comes out as one of the cities where households owe significant credit card debt.
Households in Orlando on average owe $10,533, according to the report. Fort Lauderdale leads the state with average credit card debt of $14,400 per household.
The study, which actually ranks cities by the average credit card debt paid down by household, ranks Orlando at No. 134. Data shows households have paid off around $712 of credit card debt in the first quarter of the year.
That’s not much considering collectively, households in Orlando owe $1,181,150,175 to credit cards. Residents have collectively put nearly $80,000,000 toward the overall credit card debt, hardly making a dent. WalletHub calculated these figures using information from the U.S. Census Bureau and Federal Reserve and TransUnion.
Study findings say it’s been harder to make more payments as the economy is reopening and there’s more temptation to swipe that credit card. Finance experts offered tips to manage credit card debt.
- Make a budget and stick to it: As the coronavirus pandemic drastically changed people’s economic situations, WalletHub advises analyzing one’s spending, combing through expenses and being realistic with the cost of services and products as one plans a budget. Finance experts recommend ranking expenses, including debt payments, then “trim the fat.” Revisit this budget as income changes.
- Build an emergency fund: If the pandemic showed the world anything, it’s that one’s situation can change in an instance. Building back up that safety cash will come in handy when another unexpected event or emergency occurs. WalletHub said your goal should be to gradually save about a year’s worth of after-tax income. Make sure to include this savings plan in your budget.
- Improve your credit: More credit doesn’t necessarily mean more debt. Improving your credit standing will impact the cost of your debt, and reducing that cost could help you pay it off faster. Here’s how to check your latest credit score for free.
- Try the island approach: The island approach is a strategy that involves using a collection of credit cards, with each serving a specific purpose, according to WalletHub. The finance website provides the example of transferring existing debt to a 0% balance transfer credit card to save on finance charges and get out of debt sooner. It explains a consumer could also utilize a rewards card or two, like travel rewards or cashback, for purchases that you’ll be able to pay off by the end of the month. This will enable you to get the best possible collection of terms and pinpoint overspending habits.
- Repay most expensive debt first: This requires using the avalanche method. The strategy advises consumers putting a majority of their monthly debt payment toward the balance with the highest interest rate, then making minimum payments on the rest. Once the most expensive debt is paid off, repeat the process until you’re debt-free.