Americans tend to spend too much meanwhile holiday season.
In fact, some loans are still being paid the debt from last year’s purchases.
So far, 28% of shoppers who used credit cards have not paid for the gifts they bought for loved ones last year, according to the Holiday Spending Report. NerdWallet. The site surveyed more than 1,700 adults in September.
However, this is a slight improvement from 2023, as 31% of credit card users still had unpaid balances from the previous year.
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Growth in credit card balances also slowed, according to a separate credit industry quarter report of views TransUnion released it on Tuesday.
Although overall credit card balances were 6.9% higher at the end of the third quarter compared to a year earlier, that’s a marked improvement from the 15% year-over-year jump from Q3 2022 to Q3 2023, TransUnion found.
The average balance per consumer is now $6,329, up just 4.8% year-over-year – compared to an 11.2% increase last year and a 12.4% increase the year before.
“People are getting comfortable with this post-pandemic life,” said Michele Raneri, vice president and head of U.S. research and consulting at TransUnion. “With inflation returning to more normal levels in recent months, it also means consumers are less likely to overspend on these credit products.”
Last salary earnings have also played a role, according to Paul Siegfried, senior vice president and credit card business leader at TransUnion. Lower inflation and higher wages “could bring consumers into financial balance,” he said.
However, spending from November 1 to December 31 is expected to be a record of $979.5 billion and $989 billion, according to the organization. National Retail Federation.
Shoppers can spend an average of $1,778, up 8% from last year. Deloitte Holiday Retail Survey find Most will rely on plastic: About three-quarters of consumers, 74%, plan to use credit cards to make purchases, according to NerdWallet.
“Between buying gifts and booking peak season travel, the holidays are an expensive time of year,” said Sara Rathner, credit card expert at NerdWallet. However, this time, “buyers are setting strict budgets and taking advantage of seasonal sales.”
How to avoid overspending
“There is no magic wand, we have to do the hard things,” Candy Valentino, author of “The 9% Edge,” recently said. he told CNBC. Most of the time it means setting the budget and monitoring costs.
Valentino recommends reallocating funds to other areas cancel unwanted subscriptions or cutting utility costs – to help make room for holiday spending.
“A few hundred dollars here and there really add up,” he said. “Saving money is a way to set yourself up so you don’t take on new debt.”
How to save what you spend
Valentino also recommends it to consumers start your holiday shopping now to take advantage of early deals and discounts or try pooling funds among family or friends to share the cost of holiday gifts.
Then, resist the temptation by staying away from the mall and unsubscribing from emails, ignoring text alerts, turning off push notifications in retail apps and continuing to follow brands, she said.
“It will reduce your need and desire to spend,” Valentino said.
If you start the holiday season debt-free, you’re in a “strong position” to take advantage of credit card rewards, Rathner said.
Credit cards that offer rewards like cash back or sign-up bonuses will offer a better return on holiday spending, he said.
However, if you’re planning to buy big-ticket items to get bonuses, make sure you’re able to pay off the balance in full to avoid falling into holiday debt, Rathner said.
What to do if you have last year’s debt
People walk past sell signs in the Financial District on the first day of the New York Stock Exchange (NYSE) after the Christmas holiday on December 26, 2023 in New York City.
Spencer Platt | Getty Images
If you have credit card debt from last year, the first thing you can do is “look for ways to lower the interest you’re paying on that debt,” says NerdWallet’s Rathner.
A balance transfer card, for example, typically offers a 0% annual percentage rate for a period of time, usually from months to a year or more.
Moving your debt from a high-rate credit card can save you hundreds or thousands of dollars in interest payments, depending on how much you owe, Rather said.
“That allows your debt to grow,” he said.
But you have to pay off the debt in full before the interest-free period ends to take advantage, Rathner said.
Also, there are some caveats: you generally have to have good to excellent credit to be eligible for a balance transfer and there may be fees. The transfer fee typically ranges from 3% to 5% of the balance you transfer, Rathner said.
While you should budget for that detail, “the interest savings can outweigh the fee you’d pay,” he said.
Alternatively, you may be able to settle on a lower interest personal loan, depending on your credit rating. Likewise, cardholders who maintain utilization rates or the ratio of debt to total credit. less than 30% of available credits it can be bigger credit scorewhich paves the way for lower cost loans and better terms.
