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How to Manage Credit Card Debt When Holiday Shopping


And, he advises, put savings on your “spending” list and set aside some cash. That way, you’ll have some reserves for when the holiday bills come due.

Here are some questions and answers about managing holiday spending and debt:

Limiting card spending is especially important because interest rates are rising, which means it costs more if you carry your balance from month to month. The average credit card rate topped 19 percent, up from about 16 percent earlier this year, according to Bank rate.

Buy now, pay later services, including Afterpay, Affirm and Klarna, are growing in popularity. More than a quarter of Americans have used them and most are satisfied with them, according to a new survey from Consumer Newspaper. Short-term loans, often offered online at the point of sale, allow borrowers to pay part of a purchase upfront and pay the balance in a set number of payments.

But there is reason to be cautious in using the services. Users may not see it as a form of credit, but, Ms. Ellis said, “It is still a debt.” Loans are easy to get, so people can pull out a lot – and then have a hard time juggling them. Consumer Reports found that people with four or more loans at once missed payments twice as high as those with fewer loans. The survey also found that 10 percent of people who have used these services said they had trouble getting a refund or stopped paying for items they never received.

If you cannot pay your balance in full, pay more than the required minimum payment. Otherwise, it will take you longer to pay off your debt and pay more interest. “Let’s have a general rule,” says Mr. Wright, such as paying $10 more than the minimum or twice the minimum.

A series of studies by researchers at institutions including Ohio State University have found that people can choose to make specific purchases to pay off debt — such as coffee at Starbucks or utility bills — Pay more to reduce debt. This technique increases awareness of what has been repaid, leading to awareness of greater progress in reducing debt, a report on said experiments.

Grant Donnelly, an assistant professor of marketing at Ohio State and one of the report’s authors, said some credit cards, including those from American Express and Chase, have options for users to choose from specific purchases for payment over time. But they may charge a fee to set up a payment plan.

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