Could you afford $1,000 emergency expense? 57% of Americans can't

If you had a $1,000 emergency expense come up this week, could you afford to pay it from savings?

According to two new Bankrate.com surveys, 57% of U.S. adults are unable to afford a $1,000 emergency expense and 35% of U.S. adults carry credit card debt from month to month, up from 29% last year. One in four or 25% of Americans would put that $1,000 unexpected expense on a credit card and pay it off over time, which is the highest seen in the nine years of polling.

More:'It’s going to help a lot of people:' Free programs in Akron, Green help prevent falls

Additionally, 85% of Gen Z and 79% of millennials couldn't pay from savings compared to 69% of Gen X and 53% of Baby Boomers.

“The American financial way of life for many years now has sort of been paycheck to paycheck,” Mark Hamrick, a senior economic analyst with Bankrate told me.

Triple trouble with credit card debt

There is triple trouble for people who carry credit card debt right now, Ted Rossman, a Bankrate senior industry analyst, told me:

• There are more people carrying balances.

• Credit card balances are 15% higher than they were a year ago, according to the New York Federal Reserve Bank.

• And credit card interest rates are at record highs with the average rate at 19.93%.

Here are some more findings from the survey:

• More than 2 in 5 or 46% of credit card holders carry debt from month to month on at least one card, up from 39% last year.

• 43% of U.S. adults with credit card debt don’t know all of the interest rates on the cards that carry a balance.

• 37% of U.S. adults with credit card debt are unaware of balance transfer cards.

Rossman said it is alarming that so many with credit card debt don't know their interest rates or are prioritizing rewards.

“If you have credit card debt, you need to put your interest rate first," he said. "If you carry credit card debt, forget about rewards for now because it doesn’t make sense to pay 20% in interest just to earn 1%, 2% or even 5% in cash back or airline miles."

More:Still waiting for your 2020 unemployment tax refund? Amend your return

Advice for breaking down your credit card debt

• Look for balance transfer cards. Many credit cards will offer new customers a balance transfer option to pay off your balance with 0% interest for a certain period of time. Some can be as long as 21 months. “To be fair, they’re not doing this out of the goodness of their heart,” said Rossman. “They’re banking on a good number of these people not paying them off during the promotional period and then the interest rate goes way up.”

But if you can be disciplined by not adding to that debt and dividing the amount owed by the number of months in the promotion to pay it off, that can save you hundreds or maybe thousands, depending on how much you owe, he said.

There is typically a balance-transfer fee, which is anywhere from 3% to 5% of the transferred amount, which you pay up front. But that promotional time still gives you a good amount of time to pay off the balance without racking up interest, said Rossman.

• Pay more than the minimum. The minimum payment on most credit cards is 1% of what’s owed. At that rate, it’s nearly impossible to pay off the debt. Always try to pay more than the minimum on your balances.

• Consider non-profit credit counseling. Agencies can help negotiate your credit-card debt or put you on a debt-consolidation plan.

• Do a check-up on your credit card product. Once you pay off your credit card balance or even if you’re the type who never carries a balance, it’s never a good idea to cancel a card. Paying off debt or not having a balance helps your credit score, said Rossman.

But it’s still a good idea to do a check-up on that card, said Rossman. The study found that 43% of credit card holders have either never switched their primary card or it has been at least a decade since switching. Products and perks change, so Rossman said it’s a good idea to shop around and open another card with better perks or if you want to keep the same relationship and credit history with a credit card issuer, ask if there is a different credit card product available. In some cases, you might even be able to keep your same credit card number, which can be helpful if your account is tied to auto-payments for various accounts.

More:New guidelines suggest heavy marijuana use be disclosed before surgery

Should you pay off credit-card debt or build savings?

Rossman said there’s not an “either/or” piece of advice. If you have credit card debt and you don’t have emergency savings, it’s best if you do a little of both: continue working on paying off your debt by paying more than the minimum and also putting away a little for savings.

For those who haven’t started an emergency savings fund, Hamrick suggests a dedicated savings account and using direct deposit.

He said $1,000 "is sort of just the starting point" for an emergency savings fund.

"The advice typically (for an emergency savings account) is three to six months of expenses,” he said, adding that there are opportunities now to get some high-yield savings accounts with 4% interest if you shop around for rates.

There are opportunities for higher interest rates with CDs or other products, but you’d want an emergency fund to be liquid or easily accessible, if needed, he said.

Additionally, when you’re paying off credit card debt, be careful about adding more charges to that debt, said Hamrick.

For those consumers who will be getting tax refunds soon, using those to pay down high-cost debt and boost savings is also a good idea, said Rossman.

Beacon Journal consumer columnist Betty Lin-Fisher can be reached at 330-996-3724 or blinfisher@thebeaconjournal.com. Follow her @blinfisherABJ on Twitter or www.facebook.com/BettyLinFisherABJ. To see her most recent stories and columns, go to www.tinyurl.com/bettylinfisher. 

This article originally appeared on Akron Beacon Journal: More Americans can't afford emergency expense, rely on credit cards