CHARLOTTE, N.C. — This year has been a rough one for so many of us, it's been tough on our health, as well as our finances. So what's the best advice for managing holiday debt this year given 2020 isn't like any other year?
In the first two weeks of the 2020 holiday shopping season, consumers spent an estimated $21.7 billion online. That reflects a 21% increase from 2019 as people are still shy about brick and mortar, in-store shopping right now.
While spending is good for the economy, it can be risky for people to pile up debt.
“Taking on holiday-related credit card debt in 2020 feels like adding insult to injury,” said Ted Rossman, Industry Analyst at CreditCards.com. “While overall spending seems like it will be down, a considerable number of people still appear willing to finance these purchases. That comes with a hefty price – an average interest rate of 16%. You need to resist that temptation. It has been a tough year for so many; don’t close it by digging a deeper financial hole.”
If you're skittish about spending too much this year, look at it this way. If you spend $1,000 on a credit card with 16% interest, then only make minimum payments going forward, it will take you five years to pay it off. That's not all.
“And you are going to end up paying for this year’s Christmas well into next year and beyond,” added Rossman.
Your options? Look for those credit cards that at least offer you plenty of rewards, like cashback or money up front to open the account. Being money smart at the end of 2020 will give you less stress in 2021.
Another option is to gift small experiences, being someone’s dog walker for a week or gifting babysitting for a date night are things that won’t cost you anything but can be greatly received. Experiences don’t always need to be concert tickets or trips, so think outside the box to save money and be creative at the same time.
“A lot of the normal credit card debt reduction tactics are harder to execute right now,” Rossman added. “Many households don't have much extra money to put towards their debt these days, and it has become much harder to qualify for 0% balance transfer credit cards and low-rate personal loans. think nonprofit credit counseling is a good, actionable place to start. Reputable organizations, such as those accredited by the NFCC, can help you consolidate debts, pay lower interest rates and come up with a customized payoff plan. You can also try some of this yourself, like asking your card issuers for lower interest rates, taking on a side hustle and/or finding ways to reduce your expenses and dedicate more money to paying down credit card debt."