Nearly half of Americans expect to go into debt after holiday shopping this year. (iStock)
Many Americans expect to come out of this holiday season with more debt as inflation continues to rise. In fact, nearly 42% of shoppers expect to go into debt to pay for gifts and travel this year, according to a recent survey by US News & World Report.
The survey also found that 19.6% of respondents expect to have a balance on a credit card to fund vacations. In contrast, 13.4% say they can use a buy now, pay later plan. And 8.7% suspect they will keep a balance on these types of plans.
“The results are not surprising since two-thirds of respondents say they are at least somewhat worried about having enough money to pay for vacations this year,” US News & World Report said in its survey. “And 31.2% say they expect to spend more this year due to high prices.”
But carrying balances and getting into debt can be particularly painful in a high interest rate environment. The The Federal Reserve has raised interest rates six times this year in an effort to reduce inflation. The latest interest rate hike has put the federal funds rate in a range of 3.75% to 4%, the highest rate since the 2008 financial crisis. And while the Federal Reserve Chairman, Jerome Powell said the Fed would slow the pace of rate hikes, any spike in the federal funds rate can impact rates on consumer products like credit cards.
Yet the interest rate differential between credit cards and personal loans remains historically high. The average interest rate on credit cards was 16.27% in August. In contrast, the average personal loan interest rate was 10.16%, according to the latest Federal Reserve Bank of St. Louis data.
If you are struggling with high interest debt, you may consider paying it off with a personal loan at a lower interest rate. Visit Credible to compare loans from multiple lenders and find your personalized rate.
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Americans take on more debt
Total cleaning the debt reached $16.51 trillion in the third quarter of 2022according to the latest report from the New York Fed Household Debt and Credit Report. This represents a year-over-year increase of $351 billion.
A separate analysis by VantageScore found that in October, consumers had an average of $5,600 in credit card balances, up 0.8% month over month. The company noted that “rising interest rates and prices combined with strong consumer demand contributed to the increase in sales.”
If you’re having trouble paying off high-interest credit card debt, consider consolidating it into a lower-rate personal loan and lowering your monthly payments. You can visit Credible to compare loans from different lenders immediately without affecting your credit score.
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How to Pay Off High-Interest Vacation Debt Quickly
Despite the deals that come with shopping holidays like Black Friday and Cyber Monday, Holiday shopping is expected to top $1 trillionaccording to a recent forecasts by Insider Intelligence and eMarketer.
However, there are plenty of ways to pay off debt accumulated over the holiday season.
Sign up for a balance transfer card
Balance transfer cards allow people to pay off transferred credit card debt at 0% APR for an introductory period, which can last up to 18 months. But borrowers must ensure that they repay the transferred debt within this period. Thereafter, the balance transfer card can fetch an APR similar to a traditional credit card. In addition, interest will accrue on any new balance entered on this card.
You can visit Credible to compare different balance transfer cards from multiple credit card companies at once and find the right one for you.
Take out a personal loan
Personal loans can help borrowers shore up high interest rates debt into a single loan with a lower interest rate and potentially lower monthly payments. Each personal loan has its own terms, such as the due date or the time borrowers have to pay it back.
But borrowers should be careful to consider all loan terms as some may have prepayment penalties, which means loan holders may face fees if they repay the loan before the due date. If you want to take out a personal loan, you can visit Credible to talk to a personal loan expert and compare your options.
Opt for a mortgage refinance with withdrawal
Home prices in October were up 5% year over year, according to the latest housing market overview by Redfin. Homeowners can take advantage of this by taking money out of their home through a cash refinance to pay off high-interest debt. Visit Credible to find your personalized interest rate without affecting your credit score.
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