Suze Orman Says You're 'Asking for So Much Trouble' if You Do This Right Now
- While the economy is stable now, things could soon take a turn for the worse.
- Making the mistake of carrying debt could leave you in dire financial straits in the near term.
It pays to take her seriously.
Is the U.S. economy headed for a recession? There's reason to believe it might be.
But first, we need to backtrack and talk about inflation. Inflation has been soaring since mid-2021, and this year, price increases have truly gotten out of hand. That's left many consumers in a position where they've had to raid their savings or rack up credit card debt just to make ends meet.
The Federal Reserve, meanwhile, is eager to slow the pace of inflation. To do so, it's been aggressively implementing interest rate hikes, the purpose of which is to make the cost of consumer borrowing more expensive.
Why is that beneficial? The whole reason we're stuck in this cycle of rampant inflation is that demand for consumer goods has, for a long time now, exceeded the available supply. If borrowing gets too costly, consumer spending might wane. That could then narrow the gap between supply and demand and help inflation settle down.
But the Fed's actions could also have negative consequences. For one thing, they could spur a recession -- one that leads to widespread unemployment. Secondly, even if we avoid a recession, higher borrowing rates could put those with credit card debt in a very precarious position.
That's why Suze Orman insists that people with credit card debt need to try their best to pay it off ASAP. Those who continue to carry that debt, she says, "are asking for so much trouble."
The danger of credit card debt right now
Credit card debt is generally bad news. It can mean racking up scores of interest and damaging your credit score. But right now, it's especially important to try to pay off any credit card debt you have, says Orman.
With the Fed raising rates, your credit card balances could soon become more expensive to pay off. That's because credit card interest is commonly variable, so the interest rate you're paying on your balances at present may not be the rate you're charged next month, or the month after that.
Plus, Orman says, if a recession hits and you lose your job, you might then struggle to pay down your debt. And if you're only, in that situation, able to make your minimum payments, the amount of interest you accrue on your debt will only increase.
What's more, if you find yourself out of work, the last thing you'll want is monthly credit card minimums hanging over your head. And that, she says, is why now's the time to pay off that debt once and for all.
How to pay off credit card debt quickly
If you're sitting on a credit card balance, paying it off quickly is key. But how do you pull that off?
One option is to do a balance transfer and move your balances onto a single credit card with a lower interest rate -- or perhaps a 0% introductory rate. That could make your debt less expensive as you chip away at it.
Another option is to take out a personal loan and use its proceeds to pay off your credit cards. You'll then need to pay that loan back, but at least personal loans come with fixed interest rates, so the rate you sign up for initially is guaranteed until you're all paid up.
Of course, both of these options simply involve moving your debt around or swapping one type of debt for another. Ultimately, to rid yourself of debt, you'll need to make an effort to spend less so you can put more of your earnings toward the sum you owe. Another option is to drum up more cash by getting a side hustle.
You may not be able to pay off your credit card debt in weeks -- especially not if you have a lot of it. But if you're able to pay it off by the end of the year, you might improve your financial outlook substantially -- and avoid getting into the trouble Orman warns of.
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