About 50% of holiday shoppers have already started making purchases or plan to begin by Halloween, according to a recent survey conducted by Bankrate. The majority of these shoppers will use credit cards to pay for at least some of their purchases. The motivation for early holiday shopping has shifted from supply chain concerns to financial considerations, with consumers anticipating the impact of inflation and stressing over the cost of holiday shopping. However, it is important to note that the cost of carrying credit card debt is also increasing.
Credit card debt in the U.S. has reached a record high of $1.03 trillion, with the average consumer carrying around $6,000 in credit card debt — the highest level in 10 years. Many individuals are turning to their credit cards as a form of emergency fund due to financial struggles caused by high inflation. However, consumers are paying a steep price for this reliance on credit, as the average interest rate on credit cards is now about 21%. In fact, LendingTree has found that the average interest rate on new card offers is 24.45%, with one out of three cards reviewed having a rate of 29.99% or higher.
To start paying off credit card debt before the holiday shopping season, there are several strategies you can employ:
1. Know what you owe: Take stock of your debt and determine the interest rate on each credit card balance. This will help you create a plan to reduce your overall debt.
2. Review your credit report and score: Check your credit reports for any errors and dispute them if necessary. Paying your credit card bills on time and utilizing only a small percentage of available credit can positively impact your credit score.
3. Consider consolidating your debt: If you have a good credit score, you may be eligible for a 0% interest balance transfer card or a personal loan to consolidate your debt. Be sure to calculate any associated fees before making a decision.
4. Work with your card issuer: Contact your credit card issuer and request a lower interest rate. Many consumers have been successful in obtaining a reduced rate by simply asking.
5. Pick a repayment strategy and stick to it: Determine how much you can afford to pay each month and commit to paying at least the minimum balance due on each card. Choose between the avalanche method (paying off the highest-interest debt first) or the snowball method (paying off the smallest balances first).
Remember, if you continue to use credit cards for daily expenses, make sure to pay off the balance in full each month while focusing on paying down other debts. Ultimately, the goal is to minimize interest rates and maximize savings.
Hot Take: Prioritize Paying Off Credit Card Debt Before Holiday Shopping
As the holiday shopping season approaches, it’s crucial to prioritize paying off credit card debt before diving into seasonal purchases. The survey conducted by Bankrate reveals that many consumers will be relying on credit cards for their holiday shopping, but it’s important to consider the rising cost of carrying such debt. With credit card debt reaching record highs and interest rates climbing, it’s essential to implement strategies such as consolidating debt, reviewing credit reports, negotiating lower interest rates, and committing to a repayment plan. By taking these steps now, you can avoid falling deeper into debt during the holiday season and start the new year on a more financially secure note.
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