4 Things Young Americans Should Know About Credit Cards In 2022

The New Year is here and it is traditionally the time for new beginnings. You likely have a lot of exciting or fear inducing things going on, whether your New Year’s resolutions include using your gym membership or achieving career goals.

The credit cards in your wallet are probably nowhere near the first thing you think about. However, 2022 credit card trends can have a huge impact on your financial health. What you do (or not do) with your credit cards in the New Year can make a significant difference in your budget and even in your lifestyle.

Don’t worry, I’m not sending you on a research mission to find out what’s in store for credit cards in 2022. Read on to learn what to expect from the card landscape and how to prep your wallet.

Things to know about credit cards in 2022

Your credit card debt can get more expensive

According to a new Bankrate poll, 53 percent of Gen-Z (16-25 years old) and 41 percent of Millennials (26-41 years old) who bear credit card debt don’t know their interest rates.

To be honest, I don’t know the APR on my cards either – but I don’t have any credit either. I avoid them at all costs.

Credit card debt is incredibly expensive, and it’s getting even more expensive thanks to the Federal Reserve, which is expected to raise its target interest rate this spring.

When the Fed hikes rates, credit card rates will start to rise too.

“If the Fed’s median forecast is correct and the federal funds rate increases 75 basis points this year, the average credit card rate would rise from 16.13 percent today to about 16.88 percent,” said Ted Rossman, senior industry analyst at Bankrate .

This also makes your credit card debt more expensive.

Rossman cites the following example: “At 16.13 percent, someone who pays the minimum average credit card debt ($ 5,525, according to Experian) would be in debt for 194 months (just over 16 years) and pay $ 6,160 in interest . The minimum payments would start at around $ 130 and decrease with the balance. At 16.88 percent, it would take 196 months and be $ 6,472 in interest (an increase of $ 312). The minimum payments would start at around $ 133. “

As you can see, minimum payments can keep you in debt longer, especially if interest rates keep rising. The best solution is to make paying back credit card debt a priority.

Revise your budget and see where you can cut expenses to get your cards paid off faster. Rossman also suggests a nonprofit credit counseling service that takes on a sideline or sells unneeded possessions to raise some cash.

It can get harder to pay off your cards when you have a student loan

During the coronavirus pandemic, the repayment of student loans was suspended, relieving many households.

If this applies to you, you may have reduced more of your card debt as your budget allows for more room for credit card bills.

However, this could change soon.

“The deferral period for student loans currently expires on May 1, 2022,” says Hanneh Bareham, student loan expert at Bankrate. “Borrowers who have taken the government relief period need to review their monthly student loan payments and interest rates against their other debts. While borrowers should prioritize high-interest debt, such as credit card debt, it is also important that they also make at least the minimum payments on all of their lower-interest debt – including their student loans – as well. “

According to Bareham, paying back that monthly student loan could affect your ability to pay off other debts. For this reason, it is best to research the award options and benefits that the government is offering to federal student loan borrowers.

“Various repayment plans are offered, such as income-oriented repayment plans, which can make the monthly amount more manageable,” suggests Bareham. “There are also federal award programs such as Public Service Loans (PSLF), which awards the remaining federal student loan balance to qualified civil servants after 120 on-time payments.”

Whether or not you choose to avail the waiver options, it is best to clear your credit card balances before May so as not to overwhelm your budget with multiple types of debt.

If that isn’t enough time to cash out your balance, don’t worry. There may be another way to avoid credit card interest.

A credit transfer card can help

With a credit transfer credit card, you can transfer funds from your other cards for a fee (usually between 3 and 5 percent) and pay no interest for the duration of an introductory phase.

Such cards became rare in 2020 as credit card issuers tightened the underwriting for many card products.

In 2021, however, the credit card market boomed and balance transfer cards made a comeback. They returned with a bang, with some cards offering up to 21 months with no interest.

To see how this works in practice, let’s return to our example where we are $ 5,525 in debt.

“In this scenario, you could make 21 straight payments of approximately $ 263 to reduce that $ 5,525 debt without paying interest,” says Rossman.

This strategy can save you thousands of dollars in interest and years of worry about credit card payments, especially when compared to making minimal payments with your existing card.

Keep in mind that even if you have credit transfer cards available again, it is best to ensure that your creditworthiness is good before applying. Prepaid transfer cards usually require good or excellent credit.

You could be missing out on something if you don’t look for a new card

Without a doubt, when you have a balance with you, it is wise to focus on paying it off. There isn’t much point in earning credit card rewards when you are paying more interest than you are making in points or cashback.

However, if you are out of credit card debt and haven’t applied for a new card in a long time, you may be missing out.

The recently mentioned survey found that 28 percent of Gen-Z and 27 percent of Millennials have never changed or used the same credit cards.

Being complacent about your credit card strategy isn’t necessarily a bad thing. They know it works for you and there is nothing wrong with that. It is understandable that not everyone wants to spend time on always having an overview of credit card offers.

That said, you’re also leaving money on the table – possibly hundreds or even thousands of dollars.

If you’re interested in upgrading your credit card game, 2022 is the year for it.

In 2021, some of the best credit cards received upgrades that made them even more desirable. More and more credit card offers came on the market, some of which rocked the industry.

More and more credit cards for consumers with poor or no creditworthiness began to offer rewards. The introduction periods for credit transfer have been longer. The messages on the front of the premium travel cards signaled that such cards are on the way to becoming more accessible.

With all of these exciting developments, I was able to get more than $ 3,000 in cashback, statements, and travel from my credit cards in 2021.

You can, too, and you can probably do even better this year if you take the time to compare credit card deals and plan your spending. I assume that the credit card market will continue to develop this year, making the offers even more attractive and accessible to more consumers.

Of course, choosing the right card can be a bit overwhelming. If you’re not sure where to start, take a look at the 2022 Bankrate Awards winners. Using a rigorous grading system, our experts have reviewed over 250 of the best cards to share the crème de la crème of credit cards with you .

The bottom line

Credit cards may not be a priority at the start of the new year. However, if you don’t know what’s happening to the credit card rates and the market itself, it can have an impact on your wallet, whether your debts get more expensive, your budget needs adjusting, or you’re missing out on potential savings and rewards.

Remember, one way or another, credit cards are most likely a part of your financial wellbeing. Why not make it a resolution to keep your credit card strategy healthy this year?

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