Nearly 28 million Americans have added to their credit card debt as a direct result of the coronavirus pandemic according to a new report.
“Even before all of this, research has been telling us that 1 in 4 American adults spends more than they make,” Breck Miller with LSS Center for Financial Resources said.
Miller said some people have always turned to credit cards to cover things they don’t have money for but during this pandemic, that problem is amplified.
“When we see so many people now dealing with unemployment or reduction in employment, it just creates this cascade of financial challenges as we move through this time,” Miller said.
While some people who’ve lost income may be turning to credit cards to pay essentials like their electric bill or maybe even their rent for the month, Miller says it can also be tempting to rack up credit card debt for things that add comfort during this difficult time.
“We buy the things that we buy because some of them we needed and some of them we just like having and when you’re dealing with the emotional challenges that right now endure, those purchases can actually be a form of self-medication so we see people really struggling with making those changes to spending,” Miller said. “It seems very easy and quick, we just swipe the card and we worry about it later, but with that comes interest.”
Miller says defining needs versus wants in your purchases right now will make the biggest difference on how much you have to pay down the road.
“Do I really truly need this item? And if so, maybe that is a time to use a credit card. But if it’s not something you really have to have right now, you’ll probably want to put that purchase off until later until we have the extra cash to cover those things,” Miller said.
Miller also warns that making the minimum payments on credit cards is incredibly expensive and will cost you much more money over more time. If you do have to use credit cards right now, make a plan to pay off the debt quickly once your regular income returns.