September 18, 2020

It’s time to social-distance yourself from credit card debt

The Great Lockdown distanced us from our friends and family, but also from our money goals. As the 50 states slowly reopen to a ‘new normal’, and wages gradually recover, it’s time we deal with our credit card debt.


If you added to your card debt during the pandemic, you’re not alone. One in three Americans used their cards ‘more than ever’, and one out of four increased their card debt in the past few months, according to a CreditCards.com poll. At the same time, a similar number had their credit limits slashed by card companies, as banks themselves brace for tough times ahead.
As Smash co-founder Chris outlines in this article, these two effects — higher spending and lower credit limits — can combine to make lasting damage on our financial health and the broader economy.

The good news is that if you’re reading this, you’re on the right track. Deciding to do something about it is the first step to restoring your financial health. We outline ten recommendations to help you smash your credit card debt:

1. Make a budget

Start by making a budget that includes your income, minimum expenses and financial obligations; card payments, auto and student loans, mortgage, etc. Make a realistic assessment of your ability to pay down debt.

Seek advice from a credit counseling service if debt from different sources is adding up to the point where paying it off might become unmanageable or unlikely. They can help you get better terms from your lenders and refinance if needed.

2. Consider a consolidation loan

If you have good credit, a consolidation loan or a balance transfer card can help combine debt under one balance and one lower rate. In the process this can free up your credit lines should you need them in an emergency. Beware that this can be a double-edged sword, as it causes some to end up deeper in debt after a few months.

3. Talk to your lenders

You can talk to your lender if you’re having problems making your card payments. Card issuers have created programs designed to help you out during the pandemic. Options include deferred/late/skipped payments, waiving late fees and penalties, or a new due date for your card.

See this article from NerdWallet for more details on what issuers are offering, or check here what Chase, Citibank, Discover and other major issuers are doing.

4. Rethink your products and rewards

Consider changing cards with high maintenance fees, particularly if cash-backs or rewards aren’t compensating for those payments. Several issuers are open to moving your account to a no-thrills product that would do just as well. Others might waive our annual fees or offer a retention bonus.

Don’t loose your rewards. Keep track of expiration dates, and ask for time extensions for points, miles, and other benefits.
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5. Watch your limits

Keep track of how close you are from maxing out an account; card companies can levy surcharge fees and penalty APRs for going over the spending limit.

6. Make all your minimum payments

Make sure to make your minimum payments. If nothing else, at least pay the minimums on all your cards to avoid late fees and making lasting damage to your credit score. Late fees can be hefty, and can add up to other penalties, including higher APRs and lower limits.

7. Be strategic about your payments and spending

See where your balances stand, and how high your APRs are for each card. Typically, you might want to start by paying off cards with the highest APRs and use cards with low APRs, that way you’ll chip away at your most expensive debt.

One exception to this recommendation would be any card that is approaching it’s credit limit (see #5). In this case, stop using it and pay off at least part of the balance.

8. Launch a plan and commit to it

The longer you go without paying down debt, the higher the tower of fees and interest becomes. Get started with a debt-free plan today.

Once you’re clear on which cards you should be focusing on, set a weekly goal that’s ambitious yet affordable and commit to paying it. There are many calculators available online, but as rule of thumb is you can calculate a monthly payment by dividing the total debt balance by the number of months you want to pay it by, and then adding 10 percent. Divide again by four to get a weekly amount. The actual time to be debt free will be different because of how interest adds up, but it will give you a rough idea.

Set a weekly reminder on your calendar or your phone to make sure you’re actually making those payments. Make it a habit.

9. Leverage government aid towards your debt

Because of compounding, any extra money you can put towards your debt will go a long way. When you’re paying 20 percent or more APR on credit card debt it’s hard to find a better bang for your buck; you’ll be hard pressed to find a stock index with that guaranteed return.

In fact, one out of four millennials used their CARES Act stimulus check to pay down credit card debt. Officials are discussing the approval of a second stimulus check for late July. So keep up to date and use this money wisely.

10. Beware of scams

Online fraud has increased, and scammers have found new ways to take advantage of people during the pandemic; from fraudulent charities to tricking people into handing out personal information to obtain their government relief check. See more here.

Program your money

Many of us have 3, 4 or more cards. Staying on top of just due dates can be exhausting, and sticking with the payment plan can be a herculean task.

At Smash, the app we’re building, we want to make it easy. You’ll be able to connect all you cards, see your combined balances in one place, and identify the worst offending cards.
Smash credit card debt

Remember the calculation to arrive at your weekly debt payment plan? Smash does it for you. And not only that, but it also automates those payments. We want to help anyone interested in improving their financial health, to program their money and outsmart their credit cards.

Be among the first ones to use the app. Visit www.smash.money and sign-up to Smash credit card debt.