With vaccination rates climbing and travel restrictions loosening, this summer saw many Americans vacationing again like it was August of 2019. The Allianz Partners USA’s Vacation Confidence Index survey found the average U.S. family taking trips this summer planned to pay more than $2,100 for the get-aways. Total vacation spending for American households was expected to exceed $150 billion for the first time in the index’s 13-year history. That total — $153.7 billion — represents a 160% increase over summer vacation spending in 2020 and a 50% increase from similar spending in the pre-pandemic days two years ago.
Credit cards can get a workout on summer vacation, with the temptation to overspend on extras around every corner. What many people may not realize is that when you use a large portion of your available balance, also known as a utilization rate, it impacts how credit companies see you. When your credit utilization goes up past 30%, your credit score can go down. Which means you may not get the best rates on home and auto loans or even apartment leases.
If summer found you charging more than you can pay off before the interest kicks in this fall, take these steps now to tackle the debt:
Know when bills are due
It’s important to know exactly when your next credit card payment is due. If at all possible, try to pay as much as you can afford above the minimum amount you owe for the month. And don’t let forgetfulness cost you even more. Go online and schedule the payment for the day, or the day before, it’s due. That way, you won’t run the risk of incurring a late fee and interest on the balance. If you don’t remember until the day your bill needs to be paid, or you don’t use online banking, you can also call your credit card issuer and make a payment over the phone using your checking account.
Chip away at high balances
When it comes to debt repayment, I prefer the avalanche method. That’s where you prioritize your debts with the highest interest rate first and use all your extra income to pay off as much of the highest rate debt as possible while still making minimum payments on the rest. When the highest interest rate debt is retired, pat yourself on the back and then move to the card with the next highest rate on the list.
Consider balance transfers
If you receive offers in the mail for lower-rate credit cards, now might be the time to move your high balance over to take advantage of a lower interest rate, hopefully zero or close to it, and a no-interest grace period.
Ask for a lower interest rate or waived fees
Credit card holders who asked their issuer for a lower interest rate, a waived annual or late fee or a higher credit limit had their request granted about 80% of the time, research shows. Unfortunately, fewer than one in four cardholders ever do this. Which means you have little to lose — other than time — by making a call and asking nicely.
Sell things you don’t need or use
We probably all made at least a few pandemic purchases we regret. We’re looking at you, still-in-the-box jumbo air fryer. To earn extra cash to pay down your debt faster, look around your home for things to sell through online auction sites such as eBay, social media marketplaces and even local consignment shops. Make sure to match each item with the best platform. It’s also a good idea to see what similar items are selling for before pricing your own merchandise.
With reporting by Casandra Andrews