Gen X Has Taken on the Most Credit Card Debt — How To Recover
Known as the “middle child” generation, Gen Xers were born between 1965 and 1980. They’re in a bit of trouble when it comes to their finances; they’re buried to their noses in debt.
According to a recent study by New York Life, Gen Xers have more credit card debt than any other generation. Also, a new GOBankingRates survey revealed that more Gen Xers have credit card debt than any other kind of debt.
Why is Gen X so mired in credit card debt? There are a few factors to consider, including the impact of major scale economic hits.
“Gen X has dealt with the most financial crises in their lifetime,” said Fred Winchar, co-founder, president and CEO of MaxCash.com. “Starting with the crash in ’87, then the Great Recession and most recently the pandemic, the hits have just kept coming. They are also caught between a rock and a hard place because of their age. Their aging parents probably need help since they are retired on a fixed income and their kids are going to college or struggling to enter the workforce and need financial help as well.”
Whatever the reasons for their massive debt, Gen Xers need a way out from under it. How can they recover?
Create a Budget
If you’re a Gen Xer who is mired in credit card debt and you haven’t already carved out a budget, now is the time to get working on it.
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“Creating a budget is crucial to understanding monthly expenses and income, allowing for identifying areas to cut back on expenses and prioritize payments,” said Percy Grunwald, a personal finance expert and the co-founder of Compare Banks.
If you’re already sticking to a budget, it may be time to revamp it to cut out unnecessary costs and value needs over wants.
Rethink How You Spend
When assessing your budget, think about how and where you spend. This may seem small, but it could make a major difference.
“Look at your spending to see where you can make cuts,” said Richard Barrington, a financial analyst for Credit Sesame. “Rethink how you shop. Fast-rising prices and supply-chain disruptions may have widened the price gaps between different retailers. That may make this an especially rewarding time to shop around, especially if you can do it online.”
Prioritize Paying Down High-Interest Debt
When you’re buried in debt, it can be tough to figure out where to get started paying it down so you can get back your financial freedom. Turn first to the credit card debt that is racking up the highest interest.
“Focus on paying off your highest-interest rate credit cards first while making minimum payments on the rest,” said Ryan McCarty, CFP, lead adviser at Castle Rock Investment Company. “This can help you save money on interest charges and pay off your debt faster.”
Shop Around for Better Credit Card Rates
You need to cut back on credit card usage — that’s a tip in itself — but if you need just one card, make sure it’s one that won’t further stymie your financial progress.
“There are always differences in the rates offered by different credit cards, but a fast-changing rate environment could widen some of these differences,” Barrington said. “If you regularly carry a credit card balance, this might be a good time to shop around for a card that charges less on your balance.”
Negotiate With Credit Card Companies
Gen Xers steeped in debt should be ready to negotiate with their credit card companies for lower interest rates and/or debt settlement options.
“Contact your credit card company and explain your financial situation, emphasizing your willingness to repay the debt,” said Sam Weisfeld, the managing editor at FinImpact. “Inquire if they can reduce your interest rate, which will allow you to pay off your debt faster. If you are having difficulty making payments, consider requesting a hardship plan or debt settlement option. Debt settlement entails negotiating with creditors to pay off a portion of your debt in exchange for the remainder being forgiven. Be aware, however, that this may have a negative impact on your credit score.”
Consolidate Debt
One viable option to help lower and get out of debt faster is to consolidate it.
“Consider consolidating your credit card debt into a single loan with a lower interest rate,” McCarty said. “This can simplify your debt repayment and save you money on interest charges.”
Avoid Racking Up New Debt
Are you getting applications for new credit cards in the mail or offers to extend existing lines of credit? Don’t fall into the same vicious cycle. Avoid new offers and, as best you can, avoid credit cards in general.
“Avoid using credit cards for new purchases while paying off your debt,” McCarty said. “You can stick to cash or debit cards instead.”
Use Windfalls Wisely
Expecting a fat tax refund and planning a nice getaway with it? Rethink your plans with your debt center stage.
“If you receive a bonus, tax refund or other unexpected windfall, put it towards your debts instead of spending it,” said Doug Carey, CFA, the president and owner of WealthTrace.
Get Professional Help From a Credit Counselor
Maybe you can recover from massive debt on your own, but maybe you could use some professional help. There are plenty of credit counselors who can be of assistance.
“A credit counselor can help you create a debt management plan and negotiate with creditors on your behalf,” Carey said.
Stay Committed To Paying Down Debt
Getting out of major debt is a multi-faceted and often long process. Be prepared to be in this fight for the long haul.
“Recovering from debt takes time and dedication,” Carey said. “Stay committed to your budget and repayment plan and celebrate your progress along the way.”
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