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4 Things Young Americans Should Know About Credit Cards In 2022

4 Things Young Americans Should Know About Credit Cards In 2022
Written by Publishing Team

The new year has arrived, and it is traditionally a time for new beginnings. Whether it’s your New Year’s resolutions that involve using a gym membership or achieving your career goals, you likely have many things that are exciting or stimulating to worry about.

The credit cards in your wallet are probably far from the first thing on your mind. However, credit card trends for 2022 could have a significant impact on your financial health. What you do (or don’t) do with your credit cards in the new year can make a huge difference to your budget — and even your lifestyle.

Don’t worry, I’m not about to send you on a research mission to find what 2022 has in store for credit cards. Read on to find out what to expect from the card’s view and how to prepare your wallet.

What do you know about credit cards in 2022

Your credit card debt may become more expensive

According to a new survey by Bankrate, 53 percent of Gen-Z (16 to 25 years old) and 41 percent of Millennials (26 to 41) who hold credit card debt don’t know their interest rates.

To be honest, I also don’t know the APR of my cards – but I also don’t hold any balances. I avoid them at all costs.

Credit card debt is incredibly expensive and is about to get even more expensive thanks to the Federal Reserve, which is expected to start raising its target rate by spring.

When the Fed raises interest rates, credit card rates also start to rise.

“If the Fed’s average forecast is correct and the federal funds rate goes up 75 basis points this year, that would raise the average credit card rate from 16.13 percent today to 16.88 percent or so,” says Ted Rossman, senior industry analyst at Bankrate. .

As a result, the credit card debt you carry will also become more expensive.

Rossman gives the following example: “At 16.13 percent, a person making minimal payments toward the average credit card debt ($5,525, according to Experian) would be in debt for 194 months (just over 16 years). He will pay $6,160 in interest. Minimum payments will start at about $130 and decrease with the balance. At 16.88 percent, it will take 196 months and interest is $6,472 (an increase of $312). Minimum payments start around $133.”

You see, making minimal payments can keep you in debt for longer, especially if rates continue to rise. The best solution is to make paying off credit card debt a priority.

Review your budget and see where you can cut costs to pay off your cards faster. Rossman also suggests offering nonprofit credit counseling, facing a side hustle or selling non-essential property to raise some cash.

Paying off your cards can become more difficult if you have student loans

During the coronavirus pandemic, student loan repayments have been temporarily halted, bringing relief to many from the budget.

If this applies to you, you may have lost more card debt because your budget has more room for credit card bills.

This, however, may soon change.

“The student loan forbearance period is currently scheduled to expire on May 1, 2022,” said Hani Parham, Bankrate’s expert on student loans. Borrowers who have taken advantage of the federal exemption period will need to look at their monthly federal student loan payments and interest rates compared to their other debt. While borrowers should prioritize high-interest debt, such as credit card debt, it’s also critical that they make at least minimal payments on all of their low-interest debt as well — including student loans. “

According to Parham, having to pay off that monthly student loan again can limit your ability to pay off other debts. For this reason, it is best to research the forgiveness and benefits options the government offers to federal student loan borrowers.

“There are different payment plans on offer, such as income-driven payment plans, that can make the monthly payment more manageable,” Parham suggests. “There are also federal programs for forgiveness, such as Public Service Loan Forgiveness (PSLF), which waive the remaining federal student loan balance to eligible public employees after 120 on-time payments.”

Whether or not you decide to take advantage of any forgiveness options, it’s best to try to pay off your credit card balances before May to avoid flooding your budget with multiple types of debt.

If this isn’t enough time to pay off your balances, don’t worry. Another way to avoid credit card interest may be.

Balance transfer card can help

A balance transfer credit card allows you to transfer balances from your other cards for a fee (usually between 3 percent and 5 percent) and pay no interest for the duration of the application.

In 2020, these cards are becoming scarce, as credit card issuers have stressed underwriting many card products.

In 2021, the credit card market is booming, and balance transfer cards are back. They’re back with great fanfare, with some cards offering up to 21 months without interest.

To see how this works in practice, let’s go back to our example of having $5,525 in debt.

“In this scenario, you could make 21 equal payments for about $263 to get rid of that $5,525 debt without paying interest,” Rossman says.

This strategy can save you thousands of dollars in benefits and years of worrying about credit card payments, especially compared to making only minimal payments on your existing card.

Keep in mind that while balance transfer cards are again available, it’s best to make sure your credit score is in good shape before applying. Balance transfer cards require good or excellent credit.

You may lose some money if you are not looking for a new card

Without a doubt, if you are carrying a balance, it is wise to focus on paying it off. There’s not much point in earning credit card rewards if you pay more interest than you earn in points or cash back.

However, if you don’t have any credit card debt and haven’t applied for a new one in a while, you may be missing out.

The last survey you mentioned found that 28 percent of Generation Z and 27 percent of Millennials never changed credit cards or always used the same card.

Being happy with your credit card strategy isn’t necessarily a bad thing. You know it works for you and there is nothing wrong with that. Understandably, not everyone wants to take the time to stay updated on credit card offers at all times.

Having said that, you are also leaving money on the table by doing this – possibly hundreds or even thousands of dollars.

If you’re interested in upgrading your credit card game, 2022 is the year to do so.

In 2021, some of the best credit cards received upgrades which made them even more desirable. More credit card offerings entered the market, some of which shook up the industry.

More credit cards for consumers with bad or no credit are starting to offer rewards. Balance transfer submission periods are getting longer. News on the introduction of premium travel cards indicated that these cards are on the way to becoming more attainable.

With all of these exciting developments, I was able to get over $3,000 in cash, statement and travel credits from my credit cards in 2021.

You can do that, too, and you’ll likely do a better job this year if you take the time to compare credit card offers and work out your spending strategies. I expect the credit card market to continue to develop this year, making offers more attractive and available to more consumers.

Of course, the process of choosing the right card can be a bit cumbersome. If you’re not sure where to start, take a look at the 2022 Bankrate Prize Winners. Using a strict scoring system, our experts have reviewed over 250 of the best cards to share the best of credit cards with you.

bottom line

Credit cards may not be your top priority as the new year begins. However, not being aware of what’s going on with credit card rates and the market itself can affect your wallet, whether your debt becomes more expensive, your budget needs adjusting or you’re missing out on potential savings and rewards.

Remember that in one way or another, credit cards are most likely a part of your financial well-being. Why not make a decision to keep your credit card strategy in good shape this year?

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