Experts urging caution in tackling holiday credit card debt
Millions of Americans put more on their credit cards during the holiday season compared to any other time of year. This leaves many consumers feeling a bit of a credit card debt hangover as the new year begins.
According to WCVB television, consumers across the country put a large amount of money on their credit cards during the holiday season buying all the gifts they wanted for their loved ones. Unfortunately, this leaves many feeling a significant pinch in the following weeks and months. Consequently, the resulting credit card debt makes it difficult for borrowers both in the short- and long-term. However, experts say with a little preparation in creating a repayment plan, there is an end in sight.
“If you spent $2,000 at a 10 percent interest rate, if you really buckle down and make a plan to pay it off in a year, you’ll basically pay $100 in interest,” financial adviser Dana Levitt told the news station. “But if you pay the minimums on the balance, you could end up paying more than $800 in interest for the exact $2,000 you spent on Christmas.”
In some cases, consumers who have decent credit standings will be able to find offers for credit cards that will give them low or no interest for as long as a year. After that year, they pay a small balance transfer fee, making it easier to pay down their debt without seeing it added to. Another tip Levitt recommended is to remember how much strain overspending during the holidays puts on their wallet, this is key in helping them avoid making the same mistake again next year. It can also be helpful to set up a holiday savings account that can be contributed to throughout the year to make the immediate impact of the shopping season far more manageable.
One problem many consumers face immediately following the holiday season is that they often do not have enough to pay down their credit card bills at all. This leads to seasonal increases in the delinquency rates experienced by the nation’s top credit card lenders.