The coronavirus pandemic is putting financial pressure on millions of Americans.
Continued jobless claims, which account for people receiving unemployment benefits for at least two consecutive weeks, totaled 13.3 million for the week ending August 22, the U.S. Department of Labor reported. Additionally, a recent survey of HR managers found that one in three companies cut employee pay in response to the pandemic.
It’s no surprise, then, that scores of U.S. households are falling behind on their bills. The financial stress of trying to make ends meet may be taking a toll on your health, too. A Northwestern University study found high debt is associated with higher blood pressure in young adults. Additionally, a Rutgers University study found people who owed a high amount of unsecured debt, like credit card balances and medical bills, were more likely to suffer depression.
But there's good news: you can make money moves to address your financial anxiety. Here are four stress-relieving steps to take if you’ve experienced financial hardship:
Take stock of your finances
Contact your creditors if you’ve fallen behind
Consider a balance transfer card
Consider a credit card consolidation personal loan
1. Take stock of your finances
Before you can address your financial challenges, you have to identify what those challenges are. This requires taking an honest look at your financial picture by asking yourself these questions:
What are my debts? Calculate how much you owe in car loans, student loans, credit card balances, and other debts.
What are my discretionary expenses? Review your bank statements from the past 90 days to see how much you’re spending on non-essentials, such as recreation and restaurant dining (or, in today’s era, carry-out meals).
How much do I have in savings? Take a look at how much you have stowed away in cash reserves. (Unfortunately, many people are in a risky position: In a recent survey by SimplyWise, a retirement planning website, 35% of Americans said they could not last more than a month on their current savings.)
What’s my credit score? Many banks and credit unions offer their customers free credit score estimates. You can also get a free copy of your credit report at www.annualcreditreport.com. (Note: Your report won’t have your credit score on it, but it can give you a good indication where you stand).
2. Contact your creditors if you’ve fallen behind
If you’re having trouble paying your bills, you’re certainly not alone. About one in four Americans (24%) have missed a payment on at least one of their bills since the pandemic began, a recent survey performed by OnePoll found. Moreover, 58% of those surveyed said their financial liabilities in the form of bills have been a source of stress for them during the coronavirus crisis.
Your best approach, if you’ve fallen behind or think you’ll fall behind on a bill, is to contact your creditor and explain your situation. Many credit card issuers, mortgage companies, and any other lenders are offering financial assistance programs to qualifying customers, but the onus is on you to inform your creditor that you need help.
3. Consider a balance transfer card
Transferring high-interest credit card debt to a balance transfer credit card that has a 0% introductory rate may be a wise move, especially if you’re carrying a large balance from month-to-month.
There a few caveats, though: Most balance transfer credit cards charge an upfront balance transfer fee of typically 3% to 5% of the transfer amount; there may be limits on how much debt you can transfer onto the card; and if you have less-than-good credit (read: a credit score below 670), you may not qualify for a 0% introductory APR.
If you want to eliminate credit card debt, though, a balance transfer credit card could be right for you. Use Credible to compare balance transfer cards side by side and pick the right one for you.
Balance transfer cards typically offer a low, introductory interest rate — sometimes even offer a 0% introductory rate. So, it's wise to shop around for the best rates.
Plus, if you're able to pay down your remaining balance before the introductory interest period ends, you can save some cash by not having to pay interest charges.
Again, Credible can help you compare cards instantly. You can use their interactive tools to filter by card type to check out balance transfer cards and beyond.
4. Consider a credit card consolidation personal loan
Another way to manage your debts is to use a personal loan for consolidation.
According to newly released Federal Reserve data, the spread between the average credit card and personal loan interest rates is between six and seven points. With numbers like those, using a personal loan to consolidate debt could save you a decent amount of money, while also improving your credit score, since taking out a new loan will free up your available credit and improve your utilization ratio, which accounts for 30% of your score.
Visiting Credible will give you access to some of the best rates available and allow you to compare lenders in minutes.