The aftermath of holiday cheer often brings a less celebratory season for many, as they grapple with the debts incurred from Christmas shopping. A report by ABC15 reveals that the average American dropped around $1,300 on gifts, travel, and holiday festivities. As people start to receive their credit card bills, they're hit with the stark reality that the average credit card interest rate nowadays hovers at a lofty 20%. With such rates, failing to thoroughly pay off balances can significantly drive up the total repayment amount.
Adding to this burden, a study cited by CNBC, conducted by LendingTree, found that 37% of Americans have taken on holiday debt, averaging $1,223—marking an increase from the previous year. "Even sticking to the same shopping list as last year can cost more now," Matt Schulz, LendingTree’s chief consumer finance analyst, said in a statement obtained by CNBC. And while consumer confidence in the economic outlook plummets, as evidenced by a decline in the Consumer Confidence Index, spending paradoxically surged, with the National Retail Federation forecasting holiday spending to possibly crest the $1 trillion threshold.
For individuals like Hillary Lanier, who admitted to CNBC that her credit card debt from holiday shopping might take up to 10 months to pay down, the cycle is relentless. With credit card rates at over 20%, those unable to swiftly extinguish their holiday debt are locking themselves into a financially precarious position. Roughly 41% of borrowers are not only accumulating new debt but are still wrestling with the remnants of the previous year's expenses.
However, there is a beacon of hope for those in debt's tight grip. Counselors at nonprofit entities such as Take Charge America suggest a proactive approach. They advocate for consumers in strong financial standing, to directly request a temporary interest rate reduction from credit card companies, a move which could save up to $500 over a year. In a statement obtained by ABC15, Take Charge America emphasizes that this strategy focuses solely on diminishing the current interest rate, potentially freeing more of the consumer's payments to chip away at the principal credit card balance.
In the meantime, Americans' credit card debt continues to escalate, with the average balance per consumer reaching $6,523, a 2.2% uptick from the year prior, according to data by TransUnion. This rise is also corroborated by findings from VantageScore, pointing to a trend of increased reliance on credit during the holiday season. As the new year begins, many will be wrestling with the fallout from their holiday expenditures, seeking ways to navigate the compounding interest and looking towards options that could relieve the financial strain left by the season of giving.
