Credit Cards

Suze Orman is concerned about this disturbing credit card trend

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Could this worrying trend mean bad things for consumers?

Key points

  • Suze Orman is concerned about mounting unpaid credit card debt.
  • Right now is an especially bad time to owe money on credit cards.
  • Orman has some tips on what to do if you’re in debt, including a balance transfer.

Suze Orman is a personal finance expert who shares her thoughts on many money topics. Recently, she expressed concern about a trend specific to credit cards. She also provided some advice for people affected by worrying patterns of credit card use that concern her.

This credit card trend is cause for concern

In March of this year, Suze Orman commented that she was concerned about an increase in unpaid credit card bills. Specifically, she pointed out that in the last quarter of 2021 there has been the largest quarterly increase in unpaid bills since the New York Federal Reserve began measuring this data.

Discussing his concerns on this issue, Orman commented that the increase in debt came after a period of time in which many households had successfully reduced their bills. During the COVID-19 lockdowns spending opportunities were limited and stimulus checks offered many extra money so people were able to pay the bills. However, this trend has started to reverse and card balances have now increased rapidly.

Orman isn’t just concerned that people charge more and don’t pay for it. He also warned that credit card debt can be more expensive than usual.

“Right now could be an especially bad time to be taking on credit card debt,” he said. “The Federal Reserve is expected to begin raising the key interest rate it controls, the fed funds rate, as part of its strategy to combat the recent rise in the rate of inflation. Once the Federal Reserve begins to do this , credit card issuers are likely to react by increasing the interest rate they charge on unpaid balances. And that rate is already pretty high: the average rate is more than 16%.”

What should you do if you have credit card debt?

Orman is right to warn that rising credit card debt could be a big problem, especially as card interest rates rise. If more consumers face high credit card bills, it could hurt their ability to save and spend in the future. This can affect both individual household finances and the economy as a whole.

The good news is that he has some advice for those who carry a balance and could be affected by these high interest rates. Specifically, Orman advises those who currently have credit card debt to avoid spending on “wants” rather than needs until their debt is gone. He also suggests taking on a few side jobs to get out of debt.

For those currently facing very high interest rates, there is also another potential strategy that could help reduce the costs of paying down debt. It involves taking a balance transfer. Orman suggests this for those with a FICO® Score of 700 or higher who may qualify for a card with a long 0% APR on balances transferred.

If you can take this approach, you can lower your high rate to 0% over a period of time so that your full payment goes toward reducing your card’s principal balance rather than higher interest rates.

If he can follow these steps, hopefully he can soon get out of debt so he’ll no longer be one of the many Americans contributing to the rising credit card balances that have Orman so concerned.

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