INDIANAPOLIS — Americans feel as everything is more expensive these days and having a credit card is no exception, which is why some people say they are trying to use their credit card less.
"I use them probably about the same I've been trying to maybe even use them a little less,” Cathy Smith a credit card user said. "You know online purchases you need one and for hotels you use one so I do still use my credit card.”
According to the Federal Reserve, credit card debt in America is the highest it has ever been, surpassing one trillion dollars as of the end of June. That's not the only issue borrowers are dealing with.
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"I went to a website that keeps a database of over 300 credit card companies and they look at that data monthly and median rate is just shy of 25 percent now,” Kristen Ahlenius the Director of Education and Advice at Your Money Line said.
That interest rate is the highest borrowers have seen since the early 2000s, according to Ahlenius . That’s why some people don't keep a balance on a credit card at all.
"My wife and I, while we have used credit cards in our marriage of going on 43 years, we also pay off that credit card debt at the end of the month so we never carry a balance into the next month, never have, " Bob Alger a credit card user said.
Ahlenius says that's what everyone should be doing.
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"A really common misconception is that you can't improve your credit score unless you prove that you are using it, that's always kind of the language that is used there,” Ahlenius said. “You don't have to carry a balance on your credit on any line of credit to improve your score so I would always recommend to someone, pay off your balance as often as possible actually. "
If you do have debt, you can decrease your interest rate by carrying a lower balance.
"Say I have a balance of 4,000 dollars. Let’s try and reduce that to three grand and we will see changes in our credit score once we get below that 30 percent utilization," Ahlenius said.
The high interest rates are due to the Federal Reserve trying to lower inflation, because of those rates many people are opting out of owning a credit card at all.
"I just save up and pay cash for everything that's the best way to do it," William Nowlen an Indianapolis native said.
If you are looking to build your credit, if you pay off your balance, a credit card could still be a good option.
"If you are not using a credit card to get you out of a potential financial pickle you might find yourself in or you think you might be in its OK if your interest rate is high because you are not carrying balance,” Ahlenius said. "It doesn't matter that your interest rate could have been 17 and now it's 25. No it doesn’t. "
Here are some of the ways you can pay down credit card debt and stay in good credit standing. Wallet Hub says you should always make the monthly minimum payment on your card.
Second, you should also build an emergency fund by setting aside a little bit of money each paycheck. That way if you encounter an unexpected expense you can pay for that with the emergency fund, and still have money to pay down your credit card. If you have more than one credit card, focus most on the card with the highest interest rate first. But still make minimum payments on the other cards in the meantime.