Also, he advises, put savings on your “spend” list and set aside some money. That way, you’ll have money set aside for when those holiday expenses come.
Here are some questions and answers about managing holiday spending and debt:
What happened to credit card interest rates?
Keeping a cap on card usage is especially important because interest rates are rising, meaning it will cost more if you carry a balance from one month to the next. The credit card rate is up 19 percent, up from about 16 percent earlier this year, according to Bankrate.
Is it better to use “buy now, pay later” financing?
Buy now, pay for the latest services, including Afterpay, Affirm and Klarna, are becoming increasingly popular. More than a quarter of Americans have used them, and many are satisfied with them, according to a new study from Consumer Reports. Short-term loans, often offered online at the point of sale, allow borrowers to pay part of the purchase upfront, and pay the balance in several fixed payments.
But there is reason to be cautious about using resources. Users may not consider it a form of credit but, Ms. Ellis said, “It’s still a debt.” Loans are easy to get, so people may take out a few – and then have trouble getting them together. Consumer Reports found that people who had four or more loans at one time missed payments twice as often as those with fewer loans. The survey also found that 10 percent of people who used these services reported having difficulty getting a refund or stopping payments for items they never received.
What is the best way to pay off credit card balances?
If you can’t pay your balance in full, pay more than the required minimum payment. Otherwise, you will take a long time to clear your loan and pay a lot of interest. “Have a rule of thumb,” said Mr. Wright, such as paying $10 more than the minimum price or twice the minimum price.
A series of studies conducted by researchers at institutions including Ohio State University found that people who were able to choose something to pay for — like a coffee at Starbucks or a utility bill — paid more to reduce their debt. This process increased awareness of what was being paid, leading to the perception of greater progress in reducing debt, the research report said.
Grant Donnelly, an assistant professor of marketing at Ohio State who was one of the authors of the report, said some credit cards, including offerings from American Express and Chase, have options for users to opt-out of certain purchases to pay later. But they may charge a fee to set up a payment plan.