According to the 2019 Experian Consumer Credit Review, Americans carry an average of $6,194 in credit card debt. Alaskans have the highest credit card debt and it is almost $8,026. According to the latest data from the Federal Reserve Bank of New York. In the final quarter of 2019, U.S. credit card debt hit $930 billion which is the highest record till now.
After the outbreak of coronavirus, people have gone on self-quarantine and therefore, the number of online transactions is getting higher day by day. It can ultimately affect the credit card issuing companies badly.
Warren Edward Buffett, CEO of Berkshire Hathaway said tha. If someone has ways to pay down the credit card debt, it is better to do this as soon as possible. He said this during the Berkshire Hathaway annual shareholders meeting which was virtually held this year from Omaha, Nebraska.
Buffett recalled that a friend came with some money and ask him for advice. His first question to her was whether she had any credit card debt or not. Well, she had and she had been paying an interest rate of about 18%.
Buffett told in this regard, “If I owed any money at 18%, the first thing I would do with any money I had would be to pay it off. It is going to be way better than any investment idea I have got”.
Buffett said that. By paying off the debt, one can save more money on interest than one can get by investing the money in any stock market or any real estate. He added, “I don’t know how to make 18%”.
According to the recent consumer credit report presented by The Federal Reserve. The Central bank of the United States, the average credit card interest rate is about 16% as of May 2020.
Buffett added, “You cannot go through life borrowing money at those rates and be better off”.
The interest rate can increase anytime and therefore, it is better to pay down the debt as soon as possible. According to Buffett, the U.S. is having a very rocky economic times with millions of Americans are losing their sources of income and craving for unemployment benefits. In addition to this, he said if someone is having financial problems, there is no need to pay down the credit card debt. The main priority should be to cover the bills and buy the essential items.