Local credit union offers guidance on responsible credit card use amid climbing debt levels
PORTLAND, Ore., August 6, 2024 — Total U.S. household debt rose by $109 billion to $17.80 trillion between April and June 2024, according to The New York Federal Reserve’s Q2 2024 Household Debt and Credit Report released today. Credit card debt increased by $27 billion to $1.14 trillion, continuing its upward trajectory. And 9.1% of credit card balances became delinquent in the last year, but stabilized last quarter, signaling that borrowers are still in a position to support the economy.
“While balances remain high, leveraging credit cards responsibly can actually help you tackle debt,” said Chelsea Johnson, Consumer Underwriting Manager, OnPoint Community Credit Union. “By choosing the right cards for your financial situation and adopting smart usage habits, you can strengthen your financial stability and build a strong credit history.”
Johnson shared nine ways people in Oregon and Southwest Washington can manage debt and build credit with a credit card in response to the New York Fed’s findings:
- Use credit cards within your monthly budget. One of the best ways to build credit is to create a monthly budget and use your credit cards within that budget. Stick to using a credit card to pay monthly fixed costs—like your phone or utility bill—and then pay off the full balance each month. This helps you manage your spending while also building your credit.
- Keep your utilization low. Credit utilization is the amount of credit used versus how much is available. Using too much available credit may negatively impact your credit score. A good rule of thumb is to use no more than 30% of your available credit. If your credit utilization is high, focus on paying down debts close to their limit and paying more than once in a billing cycle.
- Monitor due dates and set up automatic payments. Set up automatic payments or calendar reminders to track payments and never miss a due date. Many bills require a minimum monthly payment if the statement can’t be paid in full. Remember, if a monthly payment is less than the minimum amount required, a creditor may consider it a missed or late payment.
- Find credit cards that fit your lifestyle. Credit card options regarding fees, rates, cash back options, and points can vary. Choose the card that complements your lifestyle, spending habits and financial goals. If you want to earn rewards, look for cards that offer cash back or points on purchases. If you travel a lot, a card that offers points for purchasing airline tickets might be right for you.
- Avoid cards with high fees and interest rates. Credit cards issued by your favorite retailer or brand might be tempting, but they tend to come with high fees and interest rates. Private-label credit cards, which can only be used at specific stores, have an average interest rate of a whopping 27.7%, according to the Consumer Financial Protection Bureau. A nearly 30% interest rate can significantly increase your monthly payment. These cards may also have limited uses and can be costly if not managed properly. Evaluate the terms and specific uses before applying to guarantee the card meets your financial needs and doesn’t incur unnecessary costs.
- Limit the number of credit cards you manage. Having too many credit cards can complicate payments and negatively impact your score if every issuer pulls your credit. OnPoint recommends maintaining around five credit cards to ensure you can manage them and avoid potential credit score issues. This allows you to benefit from various rewards and credit limits while keeping track of payment schedules and due dates.
- Read promotional offers closely. While promotional offers can be enticing, they may lead to unexpected fees and costs if not carefully evaluated. Always read the fine print and ask questions to fully understand the terms before committing to a new credit card based on a promotion. And ensure that the long-term benefits outweigh any initial perks.
- Be mindful of credit limit increases. A credit limit is the maximum amount you can spend within your line of credit. It is determined by several factors, including your credit score, payment history, age of accounts and monthly income. Some credit card issuers provide automatic credit limit increases based on usage and if your account is in good standing. You can request a credit limit increase to increase your borrowing power and help improve your credit utilization ratio. However, avoid increasing limits solely to expand spending capacity and only request them if you can repay the potential debt increase.
- Protect your finances from fraud. Credit cards not only help you build credit, but they can also protect your cash. Credit cards typically offer better security against fraud than debit cards because transactions can often be disputed, and funds are more likely to be recovered. This can provide greater protection for your finances, whereas fraudulent debit card transactions directly impact your bank account.
Visit any of OnPoint’s 57 branches if you need help reviewing your credit usage or opening a new card, or download the credit union’s free eBook, “Guide to Credit Reports and Scores,” for tips on understanding and improving your credit.
ABOUT ONPOINT COMMUNITY CREDIT UNION
OnPoint Community Credit Union is the largest credit union in Oregon, serving over 563,000 members and with assets of $9.2 billion. Founded in 1932, OnPoint Community Credit Union’s membership is available to anyone who lives or works in one of 28 Oregon counties (Benton, Clackamas, Clatsop, Columbia, Coos, Crook, Curry, Deschutes, Douglas, Gilliam, Hood River, Jackson, Jefferson, Josephine, Klamath, Lane, Lincoln, Linn, Marion, Morrow, Multnomah, Polk, Sherman, Tillamook, Wasco, Washington, Wheeler and Yamhill) and two Washington counties (Skamania and Clark) and their immediate family members. OnPoint Community Credit Union is federally insured by the National Credit Union Administration (NCUA). More information is available at www.onpointcu.com or 503-228-7077 or 800-527-3932.