Americans tend to Excessive spending in time holiday season.
In fact, some borrowers are still paying it off debt from last year’s purchase.
To that point, 28% of credit card shoppers hadn’t paid off the gifts they bought for loved ones last year, according to the company’s holiday spending report. NerdWallet. The site polled more than 1,700 adults in September.
Still, this is a small improvement over 2023, when 31% of credit card users still hadn’t paid off their balance from the previous year.
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According to a separate credit industry quarterly, credit card balance growth also slowed. In-depth information reporting from TransUnion was released on Tuesday.
While overall credit card balances were 6.9% higher at the end of the third quarter compared with a year earlier, it was a significant improvement from the 15% year-over-year increase, TransUnion found. from the third quarter of 2022 to the third quarter of 2023.
The average balance per consumer now stands at $6,329, up just 4.8% year-over-year – compared to an increase of 11.2% the year before and 12.4% the year before that.
“People are getting comfortable with this post-pandemic life,” said Michele Raneri, vice president and head of U.S. research and consulting at TransUnion. “As inflation has returned to more normal levels in recent months, it also means that consumers may rely less on these credit products to make ends meet.”
Recent salary increase That also played a role, according to Paul Siegfried, senior vice president and leader of TransUnion’s credit card business. Lower inflation and higher wages “could nudge consumers toward financial equilibrium,” he said.
However, spending from November 1 to December 31 is expected to increase to a record level of between $979.5 billion and $989 billion, according to the report. National Retail Federation.
Shoppers can expect to spend an average of $1,778, up 8% from last year, Deloitte Holiday Retail Survey establish. Most will rely on plastic: According to NerdWallet, about three-quarters, 74% of consumers plan to use credit cards to make purchases.
“Between buying gifts and booking travel during peak season, the holiday season is an expensive time of year,” says Sara Rathner, credit card expert at NerdWallet. This time, however, “shoppers are setting strict budgets and taking advantage of seasonal sales.”
How to avoid overspending
“There is no magic wand, we just have to do the hard things,” Candy Valentino, author of “The 9% Edge,” recently said. told CNBC. Most of it makes sense Set a budget and track expenses.
Valentino recommends reallocating capital from other areas – by cancel unwanted subscriptions or negotiate lower utility costs – to help make room for holiday spending.
“A few hundred dollars here and there really adds up,” she said. “That stash of cash is a way to prepare yourself so you don’t have to take on new debt.”
How to save the money you spend
Valentino also advises consumers Start their holiday shopping now to take advantage of early bird deals and discounts, or try raising money among family or friends to share the cost of holiday gifts.
Then limit temptation by staying away from the mall and unsubscribing from emails, opting out of text alerts, turning off push notifications in retail apps, and unfollowing brands on social media, she said.
“It will reduce your need and desire to spend,” says Valentino.
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-on bonuses will provide a better return on your vacation spending, she says.
However, Rathner says, if you plan on making big purchases to score such bonuses, make sure you can pay off the balance in full to avoid falling into debt during the period. holiday.
What to do if you have debt from last year
People walk past for sale signs in the Financial District on the first day back at the New York Stock Exchange (NYSE) since 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 “find ways to reduce the interest rate you pay on that debt,” says NerdWallet’s Rathner.
For example, balance transfer cards often offer a 0% annual percentage rate for a period of time, often lasting from a few months to even a year or more.
If you transfer your debt from a high-interest credit card, it could save you hundreds or even thousands of dollars in interest, depending on how much you owe, Rather says.
“That keeps your debt from increasing,” she said.
But you need to pay off your debt before the interest-free period ends to fully benefit, notes Rathner.
Additionally, there are a few things to keep in mind: You typically need to have good to excellent credit to qualify for a balance transfer, and there may be fees involved. Rathner says transfer fees are typically 3% to 5% of the balance you transfer over.
While you may need to budget for that detail, “the interest savings may outweigh the fees you pay,” she says.
If not, you may be able to consolidate into a personal loan with a lower interest rate, depending on your creditworthiness. Similarly, cardholders keep their utilization ratio – or debt-to-total credit ratio – less than 30% of their available credit can benefit from higher rates credit scorepaving the way for loans with lower costs and better terms.
