Most people turn to credit cards when they’re cash-strapped, but financial advisers say they should be a last resort and that consumers should consider other options first.
Credit card debt reached a record $1.03 trillion in the three months ended in June, according to the New York Federal Reserve, and the average interest rate paid by those who carry a monthly balance soared to nearly 23% in August, the highest since at least 2018.
Servicing credit card debt could get even costlier, too, if the Fed decides to hike its benchmark, short-term fed funds rate again before the year ends amid its ongoing fight to lower inflation to its 2% goal.
At those costs, Americans should be looking at other, less expensive ways – like life insurance, family and friends, and even their 401(k) and banks – if they don’t have enough emergency savings and need to tap some short-term liquidity, financial experts say.
“Using your credit card now should be the ground floor,” said Dan Casey, investment adviser and founder of Bridgeriver Advisors in Bloomfield, Hills, Michigan.
