Sometimes it feels as though we don’t learn from our past financial mistakes. Back in 2008, as a contributor to the recession, consumer debt reached a record high of $12.68 trillion. As of the end of the second quarter in 2019, Americans surpassed that number by $1.2 trillion; we now stand at $13.86 trillion in total household debt.1
A significant part of that debt comes from credit cards, which reached $1.08 trillion this year. Perhaps that’s not surprising, given that:2
- More than 189 million Americans have credit cards.
- The average credit card holder has at least four cards.
- The average credit card debt per household is $8,398.
Here’s the thing. While debt, when used correctly, can allow us to buy homes and pay for other big-ticket items, it’s important to not get over one’s head. If you’re concerned about whether you can cover your expenses in retirement, give us a call. We can look at your household budget and help you create a retirement income strategy that’s right for you.
One of the disquieting factors about credit cards is their relationship with interest rates. Despite a decline of 50 basis points in the U.S. 10-year note yield since last summer, the average interest rate on credit cards is still near record levels. This suggests credit card companies are not adjusting rates in relation to the target federal funds rate dictated by the Federal Reserve. Issuers appear more focused on using rewards points and other value-added benefits to appeal to customers than on lowering interest rates.3
Given that high interest rates are a key reason consumers get in debt trouble, here are few tips to keep in mind:
- Introductory rates are designed to attract new credit card customers but they usually don’t last. Check the current annual percentage rate for a card before applying or making higher-priced purchases than you can pay off by the end of the introductory rate period.
- If you open a card for its rewards (hotel and travel points, etc.), be sure to pay off your purchases each month; otherwise, the interest you accrue could outweigh any rewards you receive.
- It’s important to note that there may be annual fees associated with a credit card. Be sure to review the terms before signing up.
Fresno Financial Consultant Takeaways
Fresno financial planning is our utmost concern here at Soutas Financial and we thought these takeaways were worth mentioning again. We do have the power to learn from our past financial mistakes. When debt is used correctly, it can be a powerful tool which can help us to buy a home or other big-ticket items. But it is important to remember not to let our credit card usage to get out of control. So when deciding to use credit cards, always remember to do your research and read the fine print.
Soutas Financial & Insurance Solutions Inc. your Fresno financial planning consultant is committed to helping take the complexity out of retirement planning. By using a variety of insurance and investment products such as trusts, probates, charitable giving, estate planning, or tax-efficient strategies, we can help you develop an overall retirement income strategy specific to you and your family. We have a strong team of professionals helping ensure you receive all the assistance you need not only in developing your retirement income strategy, but in maintaining it throughout your retirement. Contact us today at 559-230-1648 or visit us today at Soutas Financial to get your retirement plans on track for success!
Content prepared by Kara Stefan Communications.
1 Federal Reserve Bank of New York. Aug. 13, 2019. “Total Household Debt Climbs for 20th Straight Quarter as Mortgage Debt and Originations Rise.” https://www.newyorkfed.org/newsevents/news/research/2019/20190813. Accessed Oct. 24, 2019.
2 Debt.org. Bill Fay. “Key Figures Behind America’s Consumer Debt.” https://www.debt.org/faqs/americans-in-debt/. Accessed Nov. 7, 2019.
3 Brian Riley. Payments Journal. Oct. 9, 2019. “In Credit Cards, Bigger is Often Better.” https://www.paymentsjournal.com/in-credit-cards-bigger-is-often-better/. Accessed Oct. 24, 2019.
We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.
The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.