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In 2020, fewer Americans applied for credit cards as the COVID-19 pandemic kept people indoors, limited leisurely spending opportunities and even forced people to be more proactive about existing debt. And now data from earlier this year shows that Americans on average have actually decreased the amount of credit card debt they carry.
According to TransUnion's Q2 2021 Industry Insights Report, credit card balances have decreased by 4.1% year-over-year. Reduced spending meant that consumers were able to put more money toward paying down revolving credit balances.
In fact, the average card balance among millennials declined to $4,277 this year — slightly less than the $4,471 average in 2020, according to TransUnion. A similar decline can also be seen among the Gen X and Baby Boomer generation; the average balance among Gen X'ers is now down to $6,359 from $6,919, and the average balance among Baby Boomers declined from $5,777 to $5,317.
Gen Z was actually the only generation to see a slight rise in their average credit card balance in the first half of 2021— the number rose slightly from $1,522 to $1,616.
Regardless of which generation you're part of, paying down revolving debt like credit card debt can have positive impacts on your credit score, save you money on interest charges and allow you to free up more cash to use toward your other financial and lifestyle goals. Read on for some of Select's tips for managing credit card spending.
Create a budget so you know how much you can comfortably charge to your credit card each month
Creating a budget to map out your expenses can help you figure out how much you can charge to your credit card while still paying off the bill every month. Your budget doesn't have to be super elaborate — the most important thing is that it works for you. For some ideas, check out our post on how to create a budget in five steps.
Try to aim to pay off your credit card bill on time and in full each month. Although most credit cards have a minimum required amount due each month as payment, only paying the minimum means that you it will take much longer to pay off your total balance — and this will ultimately cost you more money because of the high interest charges that you'll rack up over the lifetime of your balance.
Avoid using your credit card as an extension of your income
Of course, sometimes a credit card is the only way to finance something you really need, like food or commuting costs for work. But if you can, avoid treating your credit card as extra spending money. It can sometimes be too easy to reach for your card for every purchase and before you know it, you've already racked up a high balance. A high balance in relation to the amount of available credit you have can actually lower your credit score. And, of course, the higher your balance, the more you'll spend on interest charges every month.
Consider using an interest-free balance transfer card to pay down your debt faster
Some credit cards allow you to transfer a balance from a previous, higher-interest card to pay down the amount you owe at 0% interest for a specified time. Not paying interest means that more of your monthly payment goes toward paying down the principal amount.
The amount of time you have to make interest-free payments toward a transferred balance will depend on the credit card, so be sure to read the terms carefully. The U.S. Bank Visa® Platinum Card, for example, charges 0% interest on balance transfers for 18 billing cycles (after, 18.24% - 29.24% variable). The 0% introductory APR applies to balance transfers made within 60 days of account opening.
They do, however, charge a balance transfer fee of either 3% of the amount of each transfer or $5 minimum, whichever is greater, for balances transferred within 60 days of account opening. After that, either 5% of the amount of each transfer or $5 minimum, whichever is greater. We've rounded up some other 0% APR credit cards that can help you finance your debt or new purchases.
Here are some other credit cards you might consider
While the overall average decline in debt balances is a promising indicator that consumers have prioritized credit card management, the TransUnion report also indicates that the demand for new credit cards is also on the rise. The number of new accounts increased quarter-over-quarter by 1.79% — as of 2021, there are now 464.9 million credit accounts.
Select shopped around for some new additions (or first-time credit cards) that can help you earn cash back, take advantage of travel perks, invest for retirement and more. (See our methodology for more information on how we choose the best cards.)
Here are some of our picks:
- For cash-back: Chase Freedom Unlimited® (See rates and fees)
- For travel: American Express® Gold Card
- For investing: Fidelity® Rewards Visa Signature® Card
- For balance transfers: Citi Simplicity® Card (See rates and fees)
- For a secured credit card: Discover it® Secured Credit Card
Terms Apply
But if you're looking for even more options, check out our complete list of the best credit cards.
Read more
For rates and fees for the Discover it® Secured Credit Card, click here.
Information about the U.S. Bank Visa Platinum Card and Citi Simplicity® Card has been collected independently by Select and has not been reviewed or provided by the issuer of the card prior to publication.
