Now is an opportune moment to focus on reducing outstanding credit card balances
Economic indicators suggest a possible 36% chance of a recession within the next 12 months, according to the latest poll on our website. A recession would pose significant financial difficulties, particularly for those carrying substantial credit card debt. The average credit card debt stands at $6,730, as per the most recent data from Experian. Facing such debt during an economic downturn can be challenging.
Reputable financial experts advise prioritizing credit card debt repayment in the wake of recession concerns. Although we are not currently in a recession, and predictive analyses fluctuate, access to credit can prove crucial during economic instability. In such situations, credit cards often become the primary source of financing for individuals who have exhausted their savings.
Martin Lynch, president of the Financial Counseling Association of America, suggests focusing on credit card debt elimination as a means of preparation. He emphasizes the importance of maintaining the credit you have and diligently paying down card balances.
To deal effectively with credit card debt during financial uncertainty, Lynch urges consumers to:
- Avoid panic: Develop a well-thought-out plan to tackle debt instead of rushing into rash decisions.
- Revise your budget: Allocate more funds towards debt repayment while identifying areas where expenses can be reduced or eliminated.
- Experiment with recession scenarios: Create multiple versions of your budget to prepare for various financial outcomes, such as loss of income or a reduction in income.
- Use debt repayment tools: Consider balance transfer cards and debt consolidation loans to help lower your interest rates and speed up the debt repayment process.
- Save money: Build an emergency fund consisting of three to six months' worth of basic expenses to act as a financial safety net during a recession.
- Be cautious: Be wary of quick-fix solutions like debt settlement companies that promise instant results but can have negative effects on your credit score.
In conclusion, while the likelihood of a recession remains uncertain, prioritizing credit card debt repayment and building an emergency fund can help individuals navigate economic downturns more successfully. A clear focus on credit card debt and financial savings will make it easier to weather any storm that may come.
- Given the uncertain possibility of a recession within the next 12 months, it's crucial to prioritize personal-finance management, particularly budgeting for credit card debt repayment, as advised by Martin Lynch, President of the Financial Counseling Association of America.
- To effectively deal with the potential impacts of an economic downturn on personal-finance, Lynch urges consumers to prepare by avoiding panic, revising their budgets, experimenting with recession scenarios, using debt repayment tools, saving money, being cautious about quick-fix solutions, and building an emergency fund consisting of three to six months' worth of basic expenses.
