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Credit Cards: News, Trends and Tips

Sometimes it feels as though we don’t learn from our past
financial mistakes. Back in 2008, as a contributor to the recession, consumer
debt reached a record high of $12.68 trillion. As of the end of the second
quarter in 2019, Americans surpassed that number by $1.2 trillion; we now stand
at $13.86 trillion in total household debt.1

A significant part of that debt comes from credit cards,
which reached $1.08 trillion this year. Perhaps that’s not surprising, given
that:2

  • More than 189
    million Americans have credit cards.
  • The average
    credit card holder has at least four cards.
  • The average
    credit card debt per household is $8,398.

Here’s the thing. While debt, when used correctly, can allow
us to buy homes and pay for other big-ticket items, it’s important to not get
over one’s head. If you’re concerned about whether you can cover your expenses
in retirement, give us a call. We can look at your household budget and help
you create a retirement income strategy that’s right for you.

One of the disquieting factors about credit cards is their
relationship with interest rates. Despite a decline of 50 basis points in the
U.S. 10-year note yield since last summer, the average interest rate on credit
cards is still near record levels. This suggests credit card companies are not
adjusting rates in relation to the target federal funds rate dictated by the
Federal Reserve. Issuers appear more focused on using rewards points and other
value-added benefits to appeal to customers than on lowering interest rates.3

Given that high interest rates are a key reason consumers
get in debt trouble, here are few tips to keep in mind:

  • Introductory
    rates are designed to attract new credit card customers but they usually don’t
    last. Check the current annual percentage rate for a card before applying or
    making higher-priced purchases than you can pay off by the end of the
    introductory rate period.
  • If you open a
    card for its rewards (hotel and travel points, etc.), be sure to pay off your
    purchases each month; otherwise, the interest you accrue could outweigh any
    rewards you receive.
  • It’s important to
    note that there may be annual fees associated with a credit card. Be sure to
    review the terms before signing up. 

Content
prepared by Kara Stefan Communications.

1  Federal
Reserve Bank of New York. Aug. 13, 2019. “Total Household Debt Climbs for 20th
Straight Quarter as Mortgage Debt and Originations Rise.” https://www.newyorkfed.org/newsevents/news/research/2019/20190813. Accessed Oct. 24, 2019.

2  Debt.org.
Bill Fay. “Key Figures Behind America’s Consumer Debt.” https://www.debt.org/faqs/americans-in-debt/. Accessed Nov. 7, 2019.

3 Brian Riley. Payments Journal. Oct. 9, 2019. “In
Credit Cards, Bigger is Often Better.” https://www.paymentsjournal.com/in-credit-cards-bigger-is-often-better/. Accessed Oct. 24, 2019.

We are an independent firm helping individuals create retirement strategies
using a variety of insurance products to custom suit their needs and
objectives. This material is intended to provide general information to help
you understand basic retirement income strategies and should not be construed
as financial advice.

The information contained in this material is believed to be reliable,
but accuracy and completeness cannot be guaranteed; it is not intended to be
used as the sole basis for financial decisions. If you are unable to access any
of the news articles and sources through the links provided in this text,
please contact us to request a copy of the desired reference.

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