The Importance of Debt Management

By Britt Erica Tunick

The global COVID-19 pandemic is closing in on a year, and coronavirus-related unemployment levels are still soaring. For people finding it increasingly difficult to keep on top of bills, debt management should be a top priority.

Of course, the impact of the pandemic has not been the same for everyone. While social distancing and the resulting decline in monthly costs have actually enabled a large portion of the country to pay down debt, those same factors have meant ongoing unemployment and significant financial issues for others. Though the Coronavirus Aid, Relief, and Economic Security (CARES) Act provided some short-term relief for people impacted by the virus, with the situation dragging on and additional government support looking uncertain right now, many people have turned to credit cards to keep themselves afloat.

If you are someone who has felt the economic impact of the pandemic and have seen your outstanding debt rise as a result, following are just a few things you can do to help manage your debt and try and keep it from negatively impacting your credit score.

• Take a close look at all of your expenses and see if there are any routine costs you can eliminate. While a daily coffee at Starbucks or a high-end cable package may be nice, eliminating such costs can translate to a significant savings over the course of a year.
• Though many COVID-19-related debt relief programs have already expired, it is still worth a call to your credit card issuer to see if there is any way they will work with you, such as with a flexible payment plan.
• Focus on paying down your cards with the highest interest rates first.
• If your credit score has not been negatively impacted, it is worth checking to see if you are eligible for a lower interest rate on your credit cards —something most card issuers will not offer unless you ask.
• Check out if you are eligible for a 0% or low-interest rate offer for a new credit card that you can transfer debt to from a high-interest rate card. Again, this is likely only possible if you have a good credit score. And if you do qualify, be sure to read all the terms and conditions, as breaching them could actually leave you with higher fees or rates than you began with before transferring your debt.
• If you are a homeowner who has amassed substantial equity in your home, you may want to consider taking out a home equity loan to pay off your credit card debt, especially with current interest rates continuing to be at or near historically low levels. Just remember that the ultimate cost of failing to pay off a home equity loan could be foreclosure on your home.