Society has successfully moved on from using cash to swiping their credit cards for a good part of all their paying needs. In fact, there are around 374 million open credit card accounts in the United States alone. This is certainly a convenience that people today are lucky to have. However, Americans’ love for using their credit cards has also resulted in a serious financial problem.
What Keeps People Hooked
Perks come in various forms like free gift cards
According to a survey done by the banking and investing app Stash, numerous people across multiple generations don’t even know the interest rate that their credit card provider makes them pay.
The exact figures stand at around 30% of millennials, about 40% of Gen Xers, and over 40% of Gen Z, who don’t know their cards’ interest rate. This has become a problem today as Americans reportedly ended up paying a whopping $113 billion just for credit card interest. Even more concerning is that this same statistic stood at a much lesser $76.3 billion just five years prior.
Considering all thsese, the question now is why people still continue to use their credit cards as they lose money? Apparently, they're hooked on the various rewards and points programs that their credit card providers entice them with. About one-third of people who are in debt report that they continue to pay using credits because of the perks.
The Downside
The mindset of spending on credit is reportedly particularly prevalent among younger people (Gen Z and millennials), who see having better cards as a status symbol
But it looks like the rewards they get aren’t worth it in the end at all. Proof of this is the many young people in debt from using their credit cards as their main means for spending. As of latest, revolving credit card balances in the United States have already exceeded $1 trillion. And this debt has also become a hindrance for people to save up for their retirement.
Good Alternatives
Consider holding off on using your credit card and trying better alternatives when it comes to paying for expenses
Fortunately, it’s not too late for people to take a hold on their swiping habits. Eagle Strategies certified financial planner Michael Kremer recommends looking for a debit card with a points program in lieu of a credit card.
Meanwhile, those who are still determined to keep spending on credit are advised to pay closer attention to their swiping habits. Kremer suggests people look for a chance to transfer to a card or provider with a 0% interest rate offer while paying off their balances.
Doing this can save them a lot of money and actually make a dent on their principal instead of just paying off interest. One more alternative those in debt should consider is using a cash-secured credit card that has a low limit. This route will come in handy when one is making a big purchase while avoiding the temptation of spending more.
How often do you pay with your credit card? Read on and find out if you have the same problem many other people have.