Impact of Tariffs on Personal Credit Card Debt
Americans are increasingly concerned about the impact of tariffs on their household finances, with nearly 9 in 10 (87 percent) expressing worry, according to TransUnion's Consumer Pulse Study. This concern is well-founded, as tariffs can lead to a rise in the cost of imported goods, causing prices for everyday items to increase in the United States.
This price hike may force consumers to rely more on credit cards to cover these additional expenses, potentially increasing credit card debt. For instance, Jamie Feldman, a 36-year-old co-creator of the Debt Heads podcast, is one of the nearly half of Americans in debt and is currently struggling to pay off her $20,000 credit card debt. Feldman's debt has increased due to a loss of income stability after her freelance gig ended.
Experts predict that everyday goods might end up costing Americans more due to tariffs, with immediate price hikes on groceries and delayed increases on car prices. More than a quarter of credit card debtors blame their debt on day-to-day expenses like groceries, childcare, and utilities.
To manage this financial burden, experts recommend keeping credit utilization below 30 percent and working with a credit counseling agency to create a debt management plan with a lower interest rate, which can help you pay off debt faster. Consolidating your credit card debt onto a lower-interest product, such as a personal loan or a home equity line of credit (HELOC), can also help you save on interest charges.
A balance transfer card could buy you time to pay off debt without accruing more interest. If you have a $30,000 credit limit, carrying a balance no higher than $8,000 to $10,000 can help improve your credit score. However, carrying credit card debt can be one of the most expensive ways to borrow.
The economic uncertainty caused by shifting tariff policies can exacerbate financial stress, potentially affecting credit availability and job security, which indirectly impacts the ability to manage and repay credit card debt. This uncertainty can lead to increased borrowing on credit cards as households try to bridge income shortfalls or rising expenses.
In summary, tariffs raise prices on imports, contribute to higher consumer costs, and thus may cause Americans to increase their credit card borrowing to cope with the increased financial burden, elevating overall credit card debt levels. It is crucial for individuals to stay vigilant about their spending and debt management strategies in this uncertain economic climate.
Managing personal finance becomes more challenging for Americans due to increased debt from credit cards, caused by tariffs that lead to higher consumer costs. To combat this, experts advise maintaining low credit utilization, seeking debt management plans through credit counseling agencies, and consolidating debt onto lower-interest products like personal loans or home equity lines of credit (HELOC).
