Americans are swimming in debt. According to online lender LendingTree, credit card balances are at the highest levels in over 25 years, since the lender began tracking them. At the same time, the cost of everything is going up, making it tough for many to keep up.
There are changes you can make to dig your way out of debt and maximize your money.
The rising cost of living, including food and gas, coupled with events such as job loss, has led many to rely on credit cards to cover basic expenses. Sam Fernandez, for instance, accumulated thousands of dollars in credit card debt after being out of work for an extended period.
Fernandez, who was laid off during the COVID-19 pandemic, experienced a period of unemployment for approximately one year. He recounted, “I was out of work for probably close to about a year.” During this time, Fernandez used credit cards to manage daily costs, resulting in substantial debt.
Consumer advisor Clark Howard advises individuals who receive bi-weekly paychecks to utilize months containing three paydays. These extra paychecks can be directed toward boosting debt payments. Clark stated, “I love for people that get paid every other week to use those months where you get three payrolls instead of two to boost how much money you can put toward debt.”
Another recommendation from experts is to focus on paying down the highest interest rate credit card first, making extra payments beyond the minimum due. If making larger payments is difficult, paying half of the minimum amount every two weeks can be effective. This approach results in the equivalent of 13 monthly payments over a year, which significantly reduces the outstanding balance.
Aligning bill due dates with paydays is another practical strategy. Most credit card companies allow customers to adjust their monthly due dates, ensuring that funds are available when bills are due.
Clark also suggests that paying car loans twice a month can decrease the total cost of the loan. He explained that most auto loans are structured with simple interest, which is calculated daily. Clark added, “Most auto loans are what’s known as simple interest, which means the interest is calculated daily. If your lender will accept partial payment several times a month, that will reduce the total cost of that auto loan by a meaningful amount over the years.”
Finally, experts recommend using any unexpected financial gains, such as gifts or work bonuses, to pay down existing debt, emphasizing that even small additional payments contribute to long-term savings.
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