🪦 Taming the Credit Card Debt Monster

Hey there!

Welcome back to Wicked Club, so happy to have you here again. In our last newsletter, we laid the foundation, understanding the concept of Credit Card Wellness and taking initial steps towards a healthy relationship with your cards. This week we have more stuff in store.

🗒️ This week’s rundown:

• Topic of the week: Credit Card Debt 

• Top Starter Credit Cards for Students in 2024

• What’s On My Feed?

👺 Taming the Credit Card Debt Monster

Alright, let's tackle this heavy topic head-on. Credit card debt has become alarmingly common in today's society, with the average interest rate soaring to a staggering 27.91%. To put this into perspective, that's roughly four times higher than the average mortgage rate in the US. This is INSANE (literally screaming here on my computer). What's even more concerning is how easily accessible credit cards are, giving us access to funds we may not actually possess. It's easy to fall into the trap of thinking, "Everyone else is doing it, so it must be normal." But the truth is, it's not normal, and it can lead to destructive habits and overwhelming debt for many of us.

Lowering or Paying Off Debt

I just want to start by saying that you’re not alone in this journey and with smart strategies people have overcome debt and built financial freedom and you can do it too. Here are some ways that will help you overcome debt:

1. Find a repayment method

   • Always pay more than minimums: Credit card companies require you to pay a minimum amount each month, usually around 2% of your balance. They make money from the interest you pay, so the longer you take to pay off your balance, the more money they make. Check your credit card statement for a "Minimum Payment Warning" to understand how long it will take to pay off your balance and how much interest you will pay if you only make the minimum payment each month.

   • Snowball or Avalanche? Choose a debt repayment method that works for you.

     • Snowball: Tackle smaller debts first for quick wins and motivation.

     • Avalanche: Prioritize high-interest debts to save money in the long run.

       Here’s an article that explains Snowball vs Avalanche debt repayment method in detail.

2. Negotiate Lower Interest Rates: Okay, this is something very simple to do, yet so many of us don’t even try. Contact your credit card issuer and try to lower your interest rate. Whether you negotiate a lower interest rate with your issuer or enroll in a hardship program, either option could help you manage debt, and the worst they can say is no. Just pick up that phone!

3. Balance Transfers: Yes, I know it might seem counterintuitive to get a new card when you’re trying to get out of credit card debt, but balance transfer cards that give you 0% APR to start with can help you save so much money and make a quick plan to get back into your finances. Check out our Wicked Pay app to find these balance transfer cards.

4. Master Budgeting: In all honesty, this is something I personally struggle with. Facing your finances can be daunting. The fear of seeing the "bad places" where money went can feel overwhelming, tempting us to stick our heads in the sand. But here's the thing: ignoring the problem won't make it go away. In fact, it can make it worse. So here are a few things I have started doing to be better at budgeting and might help you as well:

   • Track your income and expenses: Where does your money go? Every penny counts! Use budgeting apps if you have to.

   • Set realistic goals: Aim to save XX% of your income and allocate funds for debt repayment.

   • Prioritize needs over wants: Differentiate between essentials and "treats." Can you cook instead of eating out?

If you are really struggling to control your debt, there are other options such as debt relief programs and other debt management plans. Make sure you check out all these available resources.

💳️ Top Starter Credit Cards for Students in 2024

Back in 2018, my older sister kept telling me how important it was to start building credit early and to snag those sweet rewards. So, I took her advice and got my first credit card, the Deserve Edu Mastercard for Students. As an international student in the US, it was one of the few cards I could get without any hassle, and it helped me start building credit. But, I have to admit, I kind of forgot about it once I got a bunch of other cards. And guess what? They ended up closing my account because I never used it. Total rookie mistake! It really hurt my credit score, but you live and you learn, right? So, to help out the students in 2024, here's a list of credit cards I think they should consider.

Quick note: If you have no or bad credit history, you might also want to consider a secured card. It does come with a security deposit requirement so really look into what fits your situation and need.

1. Discover it® Student Cash Back

   • 5% cash back on everyday purchases (grocery, gas, restaurants, amazon, etc.) in rotating categories each quarter, up to $1,500 in spending per quarter.

   • Matched intro bonus: Discover will match all the cash back you earn in your first year, up to $200.

   • No annual fee.

   • Good for students with a limited credit history.

2. Bank of America Customized Cash Rewards Credit Card

   • 3% cash back in your chosen category: Select from online shopping, dining, travel, or gas.

   • No annual fee

   • Earn $200 cash back after spending $1,000 within the first 90 days of account opening.

   • Eligible for student-specific discounts and offers from select retailers.

3. Chase Freedom Flex

   • 5% cash-back on quarterly categories and travel purchases through Chase Ultimate Rewards

   • 3% cash-back on dining and drugstore purchases

   • 1% cash-back on all other purchases

   • Cell phone insurance

4. SavorOne Rewards for Students

   • Unlimited 3% cash back on dining, entertainment, streaming, and groceries (excluding superstores)

   • Earn 10% cash back on purchases made through Uber & Uber Eats, plus complimentary Uber One membership statement credits through 11/14/2024

   • No annual fee

   • $50 welcome bonus when you spend $100 in the first three months

   • Cell phone insurance

These are some of my favorite cards to recommend to anyone who is starting to build their credit. I personally use the first three cards myself and have loved using these cards. You can do more research on these cards or explore other cards based on your spending habits with our app Wicked Pay as well.

But before you go apply for any of these cards, always remember to pay your balances in full.

📱 What’s On My Feed?

In my journey of achieving Credit Card Wellness, I've begun following several online content creators and financial advisors. I often share their fun and insightful videos with my close friends, so why not share them with you guys too, right? One trend that has really caught my attention is Loud Budgeting. Although it started gaining traction back in January, I can't help but love it and want to discuss it here.

So what’s loud budgeting?

Loud budgeting is a trendy and effective financial strategy gaining traction, especially on social media platforms like TikTok. It encourages individuals to be transparent and vocal about their financial boundaries when faced with spending temptations. Here's a breakdown of its key aspects:

Core principles:

• Transparency: Openly communicating your financial goals and spending limits to friends, family, and even strangers.

• Boundary setting: Confidently saying "no" to spending that doesn't align with your goals, even if there's pressure to participate.

• Shifting mindset: Reframing budgeting from deprivation to empowerment, focusing on prioritizing your financial well-being.

Benefits:

• Increased accountability: Sharing your goals publicly motivates you to stick to them and reduces emotional spending.

• Reduced peer pressure: Asserting your financial boundaries confidently can discourage others from influencing your spending decisions.

• Community and support: Connecting with others practicing loud budgeting can provide encouragement and shared experiences.

Example:

Instead of quietly declining a friend's invitation to a pricey dinner, you might say: "Thanks for the invite, but I'm currently saving up for [your goal] and can't afford to go this time."

Overall:

I think loud budgeting can be a valuable tool for taking control of your finances and achieving your goals. While it's not for everyone, its transparency and accountability can be powerful.

@lukasbattle

Replying to @operelly LOUD BUDGETING IS THE NEW 2024 trend

@mohaewithjennypark

3 ways to be smarter with your money. Financial literacy is sexy!!! #loudbudgeting #loudbudgetingtips #financialliteracy #money #personalf... See more