As credit card debt reaches an all-time high, many Americans are expected to push further into debt by using credit cards for holiday gifts.
As North Texans gear up to spend big money for Black Friday this week, new data shows Americans are digging themselves deeper into credit card debt.
According to the National Retail Federation, people are spending more this holiday season than last – an average of $874 on gifts, despite the pinch from higher prices and inflation these past two years.
"We're all feeling the pinch of higher prices and inflation, which has thankfully slowed down a bit -- but that doesn't mean the prices have decreased and caught up yet," said Rod Griffin, Senior Director of Public Education for Experian.
Credit card debt in the United States has reached an all-time high of over $1 trillion. That's a $154 billion spike from last year, the largest debt increase since 1999.
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Experts say rising interest rates, rising costs of goods, and the struggling economy have made it harder for more people to pay off existing debt and therefore push more into credit card use to cover expenses.
Experian – one of the big three credit bureaus – did a recent survey that sheds more light on this. About 56% said they would use cash on holiday purchases and 46% said they would use credit.
"Make sure you have a budget, where your money is coming from and how much you have. I always tell people I'm looking more like Santa Claus all the time getting grayer rounder in the middle. But he keeps a list and he checks it twice and we all should and do the same thing," said Griffin.
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He added that one of the biggest things that gets people in trouble is impulse buying.
“So if you have a list, check that list. If it's not on the list, either don't buy it or go revisit your budget. Make sure you can make it work. Talk to your family about expectations and where you are now," he said. "It's important that you think about how you're going to repay that debt after the holidays because that bill will arrive and you're going to need to pay it. "
For those who realize they might not be credit card people, financial institutions have started offering more options for digital checking accounts that allow people to build credit without taking on debt. A good credit score has been crucial for housing, loans and other needs post-pandemic.
"If you're applying for credit, you want your credit scores to be as good as they can be because that's gonna get lower interest rates to take advantage of savings, which can be a very helpful thing this time of year," Griffin said.
If your credit score is good, Griffin said shoppers can consider applying for credit at one or two stores that offer a discount for signing up, but turn around and pay the bill in full right away.
"Credit inquiries are actually the least important factor in credit scores. They really have very little effect and for a short term," Griffin said. "But don't apply for a lot of credit all at once -- just pick the stores that will give you the best opportunity and stop there and resist that temptation."
If you need a credit card debt battle plan ahead of the holidays, experts suggest:
- Call your credit card company to negotiate interest rates down. They might play ball not to lose a customer.
- You can also consolidate your debt with another company for a better introduction rate.
- Roll it into a personal loan, which typically offer lower rates.
"Let's figure out how we can have a wonderful holiday season without spending too much, without taking on more debt. Because the New Year isn't so happy and jolly when you get that bill in January and you spent too much during the holiday season,” said Griffin.
Here are some good resources in North Texas to take advantage of – these organizations and nonprofits offer financial literacy classes and other free programs to help families find economic stability. Click the links below for more information and how to get signed up:
