What to Know About Managing Money Before Traveling or Living Abroad
NerdWallet's Smart Money Podcast
Deep Dive
What are the key findings from NerdWallet's Household Credit Card Debt Study regarding U.S. credit card debt trends?
The study found that U.S. credit card debt increased by 1.5% year-over-year, with nearly half of Americans citing necessities like food, housing, and transportation as contributors to their debt. The average credit card interest rate is over 23%, and carrying an average debt of $10,500 while making minimum payments can cost nearly $29,000 in total.
What are the main strategies for paying off credit card debt discussed in the podcast?
Three main strategies are highlighted: 1) Gradual repayment methods like the Debt Snowball (prioritizing smallest debts first) or Debt Avalanche (prioritizing highest interest rates first), 2) Using financial products like balance transfer credit cards or personal loans, and 3) Seeking professional help from nonprofit credit counseling agencies or considering bankruptcy in extreme cases.
Why do people prioritize paying off certain debts based on stress rather than interest rates?
Emotional factors often influence debt repayment. For example, someone might prioritize paying off a debt to a family member to avoid awkward encounters, even if the interest rate is lower than other debts. This reflects how emotional stress can outweigh purely financial considerations in debt management.
What are the benefits of using balance transfer credit cards to pay off debt?
Balance transfer credit cards offer 0% interest for a promotional period (often 12 months or more), allowing individuals to pay down debt without accruing additional interest. NerdWallet provides a list of the best no-balance-transfer-fee credit cards, which can help save money on interest and simplify debt repayment.
What are the challenges of managing money while living abroad, and how can they be addressed?
Challenges include international banking fees, foreign transaction fees, and transferring money between countries. Solutions include using multi-currency accounts like Wise, choosing banks with no foreign transaction fees, and researching expat-friendly financial tools. Opening a local bank account in the host country can also help avoid excessive fees.
What are some tips for transferring money internationally without incurring high fees?
Using services like Wise (formerly TransferWise) or The Currency Fair can reduce fees significantly. These platforms allow for multi-currency accounts and mid-market exchange rates, making international transfers more cost-effective than traditional wire transfers or bank fees.
What should expats consider when choosing credit cards for living abroad?
Expats should choose credit cards with no foreign transaction fees, multiple cards from different banks for redundancy, and cards that offer rewards in categories like dining or groceries. It's also important to apply for cards before moving abroad and to opt for paperless statements to avoid maintaining a U.S. address.
What are the tax implications for U.S. citizens living abroad?
U.S. citizens must file taxes annually, even while living abroad. They must disclose any foreign bank accounts, and hiring a U.S.-based tax accountant is recommended to ensure compliance with IRS requirements and avoid mistakes. Tools like VPNs can help manage online banking securely from abroad.
- Credit card debt in the US is up slightly year over year, driven by rising costs of necessities.
- Average credit card interest rate is over 23%, making minimum payments cost nearly triple the amount owed.
- Debt repayment strategies include debt snowball/avalanche methods, balance transfer credit cards, and professional help.
- Emotional aspect of debt management is crucial, as stress and shame can hinder repayment.
Shownotes Transcript