Some Americans drowning in credit card debt following the COVID-19 pandemic: survey

When it comes to personal finances following the pandemic, Americans are divided into two categories – some have emerged with little debt, and others are drowning in it, according to a Northwestern Mutual survey. 

More than one-third of Americans (35%) said they are carrying their highest level of debt ever or close to it, according to the survey. At the same time, 43% said their debt is close to or at a historic low. The top reason why these Americans are so indebted is because of credit cards, which account for more than double any other single source of personal debt.

Credit card balances remained near record highs at $917 billion in the first quarter of 2023, according to a TransUnion report. That's an increase of almost 20% over last year, according to the report. Moreover, the average balance per consumer grew 14.4% year-over-year to $5,733. 

Americans with personal debt said they spent 30% of their monthly income toward paying it off, and most said they expected to remain in debt for years, according to the survey. 

"This is a reminder that debt trends aren't uniform, and everyone's personal circumstances are different," Northwestern Mutual Chief Customer Officer Christian Mitchell said. "More people feel like they're moving in the right direction than those who do not, but there's still a sizable universe of people carrying more debt than ever. 

"No matter where you are on that spectrum, it's important to be proactive and intentional about how debt is managed and where it fits within a broader long-term financial plan," Mitchell continued.

If you are looking for ways to reduce your expenses and put money back in your wallet, you could consider using a personal loan to pay off high-interest debt at a lower rate, helping you save money each month. Visit Credible to find your personalized interest rate today.

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Student loan debt burdens younger Americans

Overall, 5% of respondents said that student loans was their top source of debt; the survey said. When broken down by generations, however, 17% of Gen Z and 10% of millennials cited student loans as the top reason for indebtedness.

The U.S. Supreme Court blocked President Joe Biden's student loan forgiveness plan Biden debt forgiveness plan in late June. The plan would have canceled up to $10,000 in federal loans per borrower making less than $125,000 a year (couples making less than $250,000) and up to $20,000 per borrower for those who used Pell Grants in college, eliminating about $441 billion in outstanding student debt.

The plan was poised to impact borrowers making less than $75,000 a year mainly, and none of it would have gone to people making more than $125,000, according to the White House.

Americans with federal student loans can take other paths toward relief, with some that outright forgive debt but are more challenging to qualify for than the failed forgiveness plan.

"There are productive ways to incorporate debt into a financial strategy, and student loans are a good example of that as they often result in long-term upsides," Mitchell said. "But still, it's critical to have a holistic strategy and a debt repayment plan that accounts for a diverse set of financial goals."

If you are interested in paying down your private student loan debt, a refinance could help you lower your interest rate and monthly payment. To see if this is the right option for you, contact Credible to speak to a student loan expert and get your questions answered.

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Take this step to help reduce credit card debt

As rising costs drive more Americans to take on record debt, Americans can use a balance transfer credit card or a debt consolidation loan to help reduce their burden, according to Credible. 

A credit card balance transfer can help you consolidate numerous debts into one monthly payment.

Some balance transfer cards charge an initial fee, which may be a set amount or a percentage of your transfer amount. But many balance transfer credit cards come with a lower annual percentage rate (APR) for a limited time. APR is the yearly interest rate you'll pay if you carry a balance on your credit card.   

Alternatively, a debt consolidation loan is another way to convert numerous debts into one payment. These loans can charge interest, so make sure the terms make sense, and you will only pay what was planned. Another detail to consider is that consolidation loans with longer repayment terms offer lower monthly payments, but you'll end up paying more in interest over the life of the loan.

If you are struggling to pay off debt, you could consider using a personal loan to consolidate your payments at a lower interest rate, saving you money each month. You can visit Credible to find your personalized interest rate without affecting your credit score.

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