GenWealth Financial Advisor Scott Inman discusses the state of credit card spending in U.S. households and breaks down how consumers should be thinking about debt management.

Video Transcript

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- American household debts have surpassed a record $17 trillion this year, credit card balances totaling more than $900 billion. And this quarter marked the first time in more than 20 years that credit card debt did not decrease, signaling that fewer folks are paying down their balances. This is consumers are increasingly turning to credit cards to make ends meet. A report from TransUnion showing the average Americans card balances up by 14% compared to the year prior.

Scott Inman is a financial advisor with GenWealth. He joins us now to talk all things credit card debt sponsored by FlexShares. Thanks for being here. It's astonishing when you look at some of these numbers, Scott. And so it seems as though obviously, people are seeing higher prices. They're looking at their household balance sheets in different ways as they are increasing their credit card debt. I guess overall, how should people think about how they should be using credit cards?

SCOTT INMAN: Yeah well first of all, Thanks for having me. There's no question that the current economic environment we're in with inflation running as hot as it's been for the last two years has caused people to be in more of a pinch than maybe they were before. And I understand that using a credit card may seem like a last resort. It may actually be that. But when it comes to credit card usage, what we tell our clients is you have really it's a two pronged approach.

You have to understand and be educated on how to use them wisely. And it is not a piggy bank. It is not a place to spend money on vacation. It's not a place to buy your next car or the next little toy. It should be a last resort to leave a balance on a credit card. I think the only value, really of a credit card is to be able to have a method of payment that gets you points back, rewards points, some kind of loyalty program so that you have an advantage off of that.

I'm not opposed to having a credit card, but you've got to be able to only use it within the context of a monthly budget. And I think that's what we're finding here is that people are having a hard time paying their expenses within the context of where their income is.

- For households that are using, or even individuals that are using credit cards as a bridge right now for whatever reason in this current environment that they find themselves in, how can they do so effectively in order to make sure that they're able to pay that down later on and not have a huge hits to their own kind of financial structure, if you will?

SCOTT INMAN: Yeah, I think if you are carrying a balance, and you've had to get there, and you do have some debt, you've got to attack that credit card debt. Right now, if you're not able to effectively create a plan to do that in the near term, I think you've got to look at some 0% offers. I mean, they are still out there. You can transfer some of those balances to a 0% interest rate for a period of time.

But again, I go back to the word planning here because that's where we've got to get to, working with a financial advisor and matching the income to expenses and figuring out a way to attack the payments on that. If you switch to a 0% introductory offer, if it's an 18 month offer, you better have a way to make sure you've made those payments and wiped it out in 18 months because there's obviously a real danger if you don't. Because then you're going to effectively accumulate all that interest that you would have been able to defer.

So it all comes into the context of planning to have an overall attack on the debt. And credit card debt has to be the first thing you wipe out.

- Yeah, it's probably the most insidious when as it starts to pile up in terms of the expense of it. Scott, you talked a moment ago about the advantages to having a credit card. Really, the reason to have a credit card is if you're going to get some of those rewards back. What about the idea that it also helps your credit score. Is that a myth? Is that a real thing that it helps to have a credit card?

SCOTT INMAN: I don't it's a myth. I mean, I think that when you have a record of debt payment, whether that's through a credit card or through some other loan, and you have a good record of paying that debt, that that does actually help your credit score. You don't want to be delinquent, though. You guys mentioned at the top of this segment about the increase in delinquencies on payments. And that's the danger of don't want to go into hey, I need a credit card because I want a good credit score.

Because you could actually end up ruining your credit score because you have too much debt on that credit card. I don't have a problem with having one. I think a lot of places will tell you, look, don't even have a credit card. I don't have a problem with having that. But it's got to be used within a disciplined, planned out approach, or you can get in real trouble.

- Scott Inman, who is the financial advisor with GenWealth joining us here today. Thanks so much, Scott, appreciate it.

SCOTT INMAN: Thank you for having me.