It’s that time of year again to decide what part of your life you want to improve in the New Year. According to Nielsen, the top three New Year’s resolutions of 2015 were “stay fit and healthy” (37%), “lose weight” (32%) and “enjoy life to the fullest” (28%). However, for a growing number of Americans, the biggest change they want to make in 2016 has to do with debt.
Not surprisingly, Nielsen found that the fourth most common New Year’s resolution is to “spend less, save more,” which was the 2015 resolution of one out of every four Americans. The latest numbers on American consumer debt highlight just how bad the situation has gotten for a large part of the population, but many of them don’t seem to know how to turn things around.
A new poll conducted by CreditCards.com shows more than one out of five Americans with debt are now resigned to the belief they will never be able to pay off that debt. The 21% of those surveyed that indicated their debt seemed insurmountable is more than double the 9% that felt that way when the same survey was conducted in 2013.
In addition, a recent NerdWallet study found the average American household with debt now carries $15,355 in credit card debt and $129,579 in total debt.
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Making A Change In 2016
For Americans who have resolved to reduce or eliminate their credit card debt burden in 2016, here are three tips from CreditCards.com senior analyst Matt Schulz.
- Ask for a lower interest rate.
As simple as it sounds, very few people contact their credit card company and simply inquire about a lower interest rate. The credit card companies know that customers actively concerned about their interest rates are likely to jump ship if they find lower rates somewhere else, and companies are much more likely to reduce rates than customers tend to think. In fact, CreditCards.com found that about two-thirds of customers that asked for a lower rate were successful. The worst thing that can happen is your request gets rejected, and you’ve lost nothing by asking.
- Apply for a balance transfer.
The credit card business is so competitive these days many companies are offering promotions on balance transfers. Slate from Chase (no interest on balance transfers or new purchases for 15 months) and Citi Diamond Preferred (no interest on balance transfers or new purchases for 21 months) are two of the best deals out there today.
- Determine why you got into debt in the first place.
Everyone gets hit with unexpected expenses or temporary financial hardship from time to time. However, it’s important to assess your financial situation and look for patterns of spending beyond your means. These patterns tend not to change without proactive intervention.
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If you have made up your mind to take on your debt problem in 2016, the most important part of the process is having a clear plan. “Trying to eliminate debt without a plan to do it is like driving someplace you’ve never been without checking a map,” Schulz explains. “You may eventually get where you want to go, but it’ll be a much longer, costlier and more frustrating journey than it needed to be.”
The best first step in financial planning is to sit down and create a budget for necessary monthly expenses, which will serve as your roadmap to your debt-free destination. By following your monthly plan, you can easily relieve your credit card debt burden by the end of 2016.