Pay down those credit cards, before rates rise further

Now that the holiday spending party is over and credit card statements are landing in mailboxes, consumers would be wise to start whittling their balances, financial advisers and analysts say.

Consumers have been spending freely on plastic as the economy motors along. Revolving credit — mostly credit card debt — reached a record $1.023 trillion in November, the Federal Reserve reported this week. (Data for December will be reported in early February.)

Serious credit card delinquencies remain relatively low but have been ticking upward.

Bruce McClary, spokesman for the National Foundation for Credit Counseling, a nonprofit that oversees a network of agencies offering low-cost or free advice for consumers struggling with debt, said its member offices are seeing more people carrying larger balances from month to month.

"It certainly has our attention," he said.

Interest rates are expected to keep rising in 2018, meaning that borrowers who carry balances should reduce their card debt to avoid higher costs, said Matt Schulz, senior industry analyst with CreditCards.com, a card comparison website.

How to avoid trouble?

"There's nothing wrong with calling your card issuer to see if you can get a lower rate," said Bill Hardekopf, chief executive of the card website LowCards.com.

He suggests borrowers check their credit report before calling so they know what kind of a rate they might reasonably expect.

And, he advises, "be polite."

Cutting back on card charges isn't always easy to do. Julie Ford, a fee-only financial planner in New York City who works with clients in their 20s and 30s, said young adults in big cities could get carried away with lifestyle spending and lose track of their budgets amid social pressure to keep up.

"That super-expensive gym membership becomes normalized," she said.

She urges clients to consider why they got into debt in the first place — was it a one-time medical expense or emergency, or is it a more persistent problem of living beyond their means?

If it's continuous overspending, Ford suggests clients put off wardrobe updates and suspend those gym memberships, perhaps switching temporarily to jogging.

The extra cash can go toward their card balances. Most of her clients can pay off the debt within a year.

"I tell them, 'This isn't forever,' " she said.

Lauren Zangardi Haynes, a fee-only planner with Evolution Advisers in Midlothian, Va., suggests setting spending limits for any discretionary items to manage card debt.

So she established a monthly budget for wine and makes a trip each month to buy it all at once; when the wine is gone, that's it until the next month.

Buying wine in bulk means "you get a lot of strange looks," she said, but it helps keep a lid on "budget bleed."