Consumer

/

Home & Leisure

Susan Tompor: Put your stimulus cash towards credit card debt, not student loans: Here's why

Susan Tompor, Detroit Free Press on

Published in Home and Consumer News

Many families could be looking at more money than they've ever seen at once when you add stimulus cash of up to $1,400 a person on top of a healthy income tax refund.

So — if you haven't already spent it — what's a solid plan of attack to save it?

"If someone has credit card debt, I think the best use of any money would be to pay it off," according to George Papadopoulos, a certified public accountant and financial adviser in Novi, Mich.

The average rate that consumers are paying on credit card debt is 16.15%, according to CreditCards.com.

The rate on your cards could be much higher, if you have bad credit or built up debt on a credit card issued by some retailers. The average rate for those with bad credit is 25.3%, according to CreditCards.com.

"Credit card debt must go," Papadopoulos said. "The sooner the better. It is impossible to build wealth when you carry credit card debt paying egregious interest rates on it."

 

Families with credit card debt had around $6,300 in such debt on average, according to the 2019 Federal Reserve Survey of Consumer Finances. More than 45% of families reported a credit card balance after their last payment.

A stimulus payout — and a tax refund — could make an enormous difference in dealing with one's bills.

A family of four, for example, could be looking at up to $5,600 in stimulus cash as part of the latest round of payments.

Once you pay off credit card debt, many financial advisers suggest that consumers of all ages take a hard look at emergency cash on hand. Having enough money set aside can shore up your mental well being — and cover many bills — if you lose a job or face a stock market meltdown.

...continued

swipe to next page
©2021 Detroit Free Press. Distributed by Tribune Content Agency, LLC.