Debt can come in many shapes and sizes, and paying it off can be stressful – especially when there’s so much uncertainty surrounding the economy. The current global pandemic has caused layoffs and a hiring freeze, both of which have made it more difficult for some to pay their bills, further contributing to any existing debt. Below, we’ve listed some helpful tips to help you tackle any outstanding debt you have, whether it’s credit card debt, student loan debt, or high-interest debt.

Managing Credit Card Debt

Layoffs and other factors have made it difficult for people to make their payments on time. As a direct result of the COVID-19 pandemic, 23 percent of card holders have added to their credit balance and up to 40 percent of Americans can’t pay more than their minimum monthly payment.

If you have added to your debt as a result of COVID-19, reach out directly to your credit card provider to see if there are any options that could offer some relief. In the meantime, you can start building out a monthly bill payment calendar to help you keep track of your bills, the status of payments, the amount paid, and the amount still owed. This can help you visualize what payments should be prioritized and when, which can help mitigate stress.

If you’re working from home and you’re not commuting, try to use your stimulus check—or money that would have been used pre-quarantine to pay for your commute, fueling up your car, and buying coffee or lunch—to chip away at any credit card debt you have now. Also, if you work for a company in the city but live in the suburbs, you don’t have to pay the Philadelphia wage tax while working from home during this time, so you can put that money toward paying off debt as well.

If your debt is from unpaid bills or from purchasing necessities, start dipping into your emergency savings fund to pay it off. You should try to pay off credit card debt as soon as you can to avoid it growing with interest over time.

Managing Student Loan Debt

If you don’t have the means to continue paying off your federal student loans, you don’t have to (at least until September 30, 2020). You can have your account put on administrative forbearance thanks to The Coronavirus Aid, Relief, and Economic Security Act, which allows payments to be paused between March 13, 2020 and September 30, 2020. It’s important to note that in addition to being able to pause payments, interest also won't accrue during this time, so your loan balance won’t get bigger, making this a great opportunity to pay off what you can without growing interest. However, interest is not suspended on private student loans, so prioritize those payments over federal if you have them.

Managing High-Interest Debt

If you have high-interest debt of any kind, you should prioritize this first, as interest will only continue to grow. To make this feel more manageable, create a debt management plan for the next 6 months that outlines what you can afford to pay and when. If you only have one source of debt, the plan will be pretty straightforward, you’ll make the biggest monthly payment you can handle until it’s fully paid off.

But, if you have multiple types of debt spread out in a few different places, chip away at each by paying at least the minimum. Or, you can try the Avalanche Method. First, you’ll make the minimum payment on all of your accounts. Then, you should put as much extra money as possible toward the account with the highest interest rate. Once the debt with the highest interest is paid off, start paying as much as you can on the account with the next highest interest rate and continue the process until all your debts are paid off. It may take longer to see progress, but since you’re tackling your debts in order of interest rate, you’ll pay less overall and get out of debt faster.

Managing debt can be stressful, especially when there are so many factors at play. Ultimately, tackling debt should be a long-term goal, but in the short term, you can start chipping away at your debt with the tips above. Be sure to reach out to your credit union or bank to see if they have any additional resources tailored to your specific needs. 

Erin Ellis
Accredited Financial Counselor ®
Philadelphia Federal Credit Union
eellis@PFCU.COM