DENVER — This year, Americans racked up more credit card debt than ever before. A report from the Federal Reserve Bank of New York shows total credit card balances hit $1.21 trillion, which is record breaking.
Denver7 wanted to get some answers to help you avoid adding to that number. We asked Horizons North Credit Union CEO Brian Rush for his advice.
Q: When is a good time to use a credit card vs. not using one?
A: It's a good idea to use a credit card in order to build credit, earn rewards and also for security, especially with online purchases. Using a credit card for reoccurring expenses like groceries and school and fuel can help you earn rewards and track your spending, but you do want to be careful not to overspend and make sure you pay that balance off in full each month.
Q: What are some common mistakes people make when using credit cards?
A: People often make mistakes by carrying a balance, only making minimum payments and overspending just to earn reward points, and all these things could negatively impact your credit score.
Q: What about credit cards with fees?
A: You really want to look at what rewards you're earning for that program. Sometimes paying an annual fee makes sense if you're earning more than that back in rewards. If you are carrying a balance, then it probably makes more sense not to have an annual fee and just focus on that low-rate card.
Q: How can people stay on top of overspending?
A: I think the number one thing is to track your expenses. Many financial institutions out there offer expense tracking tools that are embedded right in that account app. If you don't have that, just a simple spreadsheet would help you to know where your money is actually going.
Q: If you are in some credit card debt, what is the best way to pay it off?
A: I would go to my financial institution and have them help me work out a plan. There may be ways to do a lower interest rate on a consumer loan. You might be able to use an automobile you have equity in, or perhaps use a home equity line of credit to help you reduce that interest rate and pay that off.
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