Are you monitoring the credit types that you currently have? If not, it is highly encouraged that you start doing it. With all the troubles that the coronavirus pandemic is causing, it is not impossible for one or two of your credit accounts to spiral out of control.
If you don’t want your financial situation to spiral out of control, you need to tame your debt situation while you still can. The moment you realize that there’s a chance that your debt will take a turn for the worse, you need to act on it. Because the longer it takes for you to take action, the more hurdles you have to overcome. The complicated it gets, the more it will cost you. Especially if your credit account has a high-interest rate.
Of course, it’s not just the amount that you need to think about. There are other negative effects when your debt becomes overwhelming. Like your credit score. Having too much debt and failing to keep up with payments can lead to entries in your credit report that can pull your score down.
Not to mention the stress and the budget limitations that you have to deal with on a daily basis. After all, debt can keep you up all night. It will make you worry and feel high anxiety levels – especially when you realize that you can’t afford to pay it back.
Debt can also compromise the quality of life that you can live. You always have to hold back on what you will spend on. You won’t enjoy spending your money because you’ll always be thinking about your debt payments.
2 types of credit and why they’re rising right now
As you can see, there are many reasons why you need to keep track of the debt that you owe. Because the truth is, the current pandemic is making us fear for our finances. People are losing jobs as the health crisis pushed us further into a recession. And with no income coming in, how can be pay off debt? What can we use to fund our means to survive?
Of all the debts that Americans owe, you need to pay special attention to these two credit types.
Credit card debt
Credit cards are already notorious for their high-interest rates. But now, it’s becoming even more of a problem for a lot of Americans.
According to reports, credit card debts are rising because of the pandemic. From 43%, 47% of Americans now carry debt on their respective credit cards. But what is driving the credit card balance to rise?
One reason is the increase in unemployment. With millions of people losing jobs, families are running out of cash to spend. When that happens, they are forced to use their credit cards to pay for basic necessities. Unless they find a new job, they will keep on using their cards until it reaches the maximum limit.
Since they don’t have cash in the first place, they are leaving their balance unpaid. They just keep on using it. With the high-interest rate of credit cards, their balance will grow significantly. Before they know it, their credit card debt is already too much for them to pay off.
The second of the credit types are medical bills. Before the pandemic, healthcare costs in the country is already high. In fact, a lot of Americans are already burdened with medical debts. And with the pandemic happening around us, more than 50% of Americans are worried that they cannot afford to have themselves tested for COVID-19. Even more so if they have to get treatment for it.
While none of us want to be infected by the virus, it is proving to be very sneaky. It has successfully infected millions of Americans. And with the restrictions being lifted and people start going out of their houses, it puts a lot of people at risk of getting sick.
What will you do if you get sick? If it’s a matter of life or death, you don’t have a choice. You have to get treatment. Or what if it’s a loved one that got sick – like your child? Will you let them suffer without giving them the chance to be treated?
You will probably say that you will brave the medical debt if there is a life at stake. If that is how you feel, you can bet that most Americans will feel the same way about it. And that is the reason why this is one of the credit types that will increase because of the pandemic.
How to keep the two credit types under control
Now that we know the debts that will grow, what should you do with that information? You need to make sure that these two debts will not have a chance to cripple your personal finances. Because if that happens, it will be hard for you to get out of debt.
So what can you do to make sure that these credit types will not threaten your finances?
Dealing with high-interest credit cards
The key to dealing with high-interest credit cards is to face it head-on. You don’t ignore it. When you do, it will just make things worse. That’s because every time you carry over a balance to the next billing cycle, finance charges will be added to what you already owe. This charge is calculated based on the current balance and the high-interest rate. This means the addition to your debt will be a significant amount. If you fail to pay your debt again, another finance charge will be added and this will be based on the new balance (with previous months finance charges added). That means your debt will just keep on compounding.
So what can you do to stop this? You have to deal with it immediately. If you know that you cannot pay off your credit card balance, you have to be proactive enough to ask your creditors for a new repayment plan. They have existing programs that will allow you to lower your payments – like the hardship programs.
Just make sure that if you ask them for a new repayment plan, it should be something that you can afford. Be honest, polite, and firm when you talk to them so it’s easier to get their approval on the new payment terms.
Negotiating medical debts
Like your credit cards, you also have to deal with your medical debts. To be specific, you need to call your healthcare service provider and negotiate your debts. There are several options for you to pay off what you owe. But you have to talk to them to know what these are. Some of them have their own repayment plans. Others will offer a medical credit card. There are also those who will allow you to consolidate your debts to make the monthly payments easier.
You need to negotiate what you owe with them.start by scrutinizing the billing statement. Check if everything written there is correct and reflects the treatments and services given to you. If not, you need to dispute that amount. Once you have the corrected billing statement, it’s time to negotiate the repayment plan. Be honest that you are having a hard time keeping up with your payments. Then work out a repayment plan that you can commit to.