Last updated on December 18th, 2020
Credit card debt is an issue that affects many of us. As of 2020, the average American has approximately $8,000 in debt. With such high balances, repayment is an essential part of the monthly budget. Since COVID-19 is having such an immense impact on personal finance, however, should Americans continue putting extra money towards their credit card debt during coronavirus?
Debt and Coronavirus – A Dangerous Combination
The difficult decisions that come with credit card debt become even more critical when financial hardships occur. And at few points in recent memory have economic conditions been so chaotic as with the novel coronavirus pandemic.
With rising unemployment each week, and no end in sight for the economic crisis, many Americans must choose between reducing their debts or increasing their emergency funds. Emergency funds help bridge the gap financially when lay-offs, hospital bills, or any other unexpected circumstances arise. Unfortunately, many Americans rely on credit cards as their emergency funding resource, so COVID-19 and credit card debt represents a perfect storm of financial hardship.
Can You Pay Off Debt and Save for Emergencies?
This combination of reduced income, existing credit card debt, and also no emergency funds might seem like a Catch-22. A recent opinion piece in Business Insider discusses why one American is prioritizing paying off their credit card debt instead of building an emergency fund during the coronavirus pandemic. What if there was a better way? Fortunately, some options allow consumers to pay down their credit card balance while saving money at the same time.
The Upgrade Visa® Card with Cash Rewards has grown in popularity significantly since its launch in October of last year. To date, over $500 million in credit has been extended by Upgrade to cardholders.
- Earn 1.5% unlimited cash back on card purchases every time you make a payment
- Combine the flexibility of a card with the low cost and predictability of a loan
- $0 fees - $0 annual fee, $0 activation fees, $0 maintenance fees
- No touch payments with contactless technology built in
- See if you qualify in minutes without hurting your credit score
- Great for large purchases with predictable payments you can budget for
- Regular Purchase APR: 8.99%-29.99% variable based on creditworthiness and the Prime Rate
How Does Upgrade Work?
The Upgrade Card works by extending a credit line of up to $20,000. The card is a hybrid product, working both a Visa credit card and a type of personal loan. Cardholders can use their Upgrade account to transfer their credit line to existing accounts, paying them off to create one balance. In this regard, the Upgrade is akin to a debt consolidation product.
Interest rates with the Upgrade Card start as low as 8.99% variable, and the company offers individual repayment plans, ranging from 12 months to 60 months. This blend of low APR and convenient repayment plans have been shown to reduce the time – and cost – of paying off debts. Customers simply need to make their minimum monthly payments. This allows them to pay off their credit card debt during coronavirus and save money towards emergency funds at the same time.
Should You Consider a New Credit Card During Coronavirus?
Given the economic climate, it might seem strange to consider applying for a credit card. Right now, however, might be one of the best times to apply for a credit card. That’s because the interest rates at which banks borrow money are historically low. Additionally, banks want to improve their bottom lines to investors, so they may be more willing to extend bigger lines of credit to applicants.
Whether the Upgrade card provides value depends on the unique case for each individual. Those with small debts, or those with poor credit scores, for example, may find better options through balance transfer cards or merely continuing their current repayment plans. These differing needs, in addition to the uncertainty of the current climate, make it vital that consumers carefully consider all options in advance.
Related Article: What Are the Easiest Credit Cards for Bad Credit to Get?