Are vacation shoppers going mad with credit card debt?

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Are vacation shoppers going mad with credit card debt?

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Little boy opening Christmas presents | Mint Imagse/Getty Images

There is lots of pressure on consumers to spend during the holidays, and a lot of individuals turn to charge cards to finance the festivities.

We spoke to personal finance specialists and professors about the charge card trends they are seeing this season. Following are their perspectives on credit use and suggestions for handling debt during the holiday season.

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Really jolly season for card businesses

The holidays is distinguished by elevated rates of consumer spending, with credit card firms gaining significantly. Each year, it appears that retailers make an effort to boost the amount of days dedicated to vacation spending. … I anticipate a small upsurge in consumer debt amounts to carry on to grow (consumer credit rose at a seasonally adjusted annual rate of 7 percent during the 3rd quarter 2016) through the fourth quarter.
— Peter J. Nigro, Ph.D.; Sarkisian chair in financial services, professor and chair, finance section, Bryant University

The amount of materialism

Economic growth depends on ever-rising consumption. It is about 70 percent of GDP. But in an environment of near-stagnant real wages, cool sense demands that consumers take on more debt to support economic growth. Most economists presume increase is the response to each issue, that’ is better.’ But lots of research by psychologists exemplify that materialism is the source of societal malaise and individual unhappiness.
— Susan Jacobson, Ph.D.; professor, economics, finance, liberal studies and world-wide environmental consciousness, Regis College

Plan now for next year’s holiday shopping

U.S. consumers have broken records in the second quarter of 2016 with $34.4 billion in credit card debt. Among the important trends we’re seeing now is the most credit card debt being collected while the lowest pay-downs are happening, which is never an excellent sign going into the holiday season for the market as a whole or for the individual family. Outstanding balances on personal credit card debt by the end of the year, December 2016, are projected to be above the $1 trillion mark for the very first time.

What this means is the typical sum that’s owed by families which are in debt is projected to increase to quite a dangerous and unsafe $8,500. by the end of the year Rather than borrowing, I’d recommend saving for the holidays on, maybe all year. As soon as you’re paying down those credit cards, focus and your strategy must always be on the maximum interest rate card. Don’t dip into your retirement savings; instead in the event that you have to, dip into your regular savings account(s).
— Sahar Bahmani, Ph.D.; associate professor of economics School of company, economics and computing, University of Wisconsin-Parkside

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Cardholders are becoming brighter

Credit card debt goes up during the holiday season. But in the past year or two, individuals are somewhat more aware of charge card debt. Folks are utilizing credit cards which have benefits. … Actually, folks are moving away from store-unique cards since they’re utilizing credit and debit that have international-kind benefits.
— H. Terrie Cloud; senior vice president, ICI Consulting

Not too late to tame your holiday spending

Christmas and present-offering go together. Early signs are that the typical cost for presents this year is anticipated to be greater, if just marginally, than last year.

Here are a couple suggestions for use of credit cards during the holiday season:

Establish on how much to spend on presents per person and in total.
Keep track of expenses by keeping a running total of the costs and keeping receipts in a unique area. Compare the running total to the amount that is budgeted.
If at all possible, use just one card. When the very first statement arrives, budget paid and make an effort to pay off the balance in three payments. The longer there’s a balance, the more finance charges that can collect and the longer time it’s going to take to pay off the outstanding balance.

— Larry R. White, Ph.D., CTP; chair of banking and professor of finance, East Tennessee State University

Be conscious of the warning signals

Our survey reveals consumers rely on credit cards if they’re spending for vacation purchases, which is very good. Credit cards are a helpful tool for construction credit. But if you’re not cautious about you do not pay your balance in full and on time or how much credit you use, it can damage your score. This season, we are encouraging consumers to be fiscally smart:

Develop a funding before they store.
Do not spend more than they can manage.
Comprehend and track their credit score.

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— Heather Battison; TransUnion, vice president
Shop cards may be a snare

(One credit card tendency is) starting new shop cards to reap the benefits of the brand new card member reduction offered to holiday shoppers who find that additional savings resistless.

Many shoppers are tempted by an added 10 to 20 percent off a purchase into opening a fresh shop card, specially during the holidays. Nevertheless, this savings strategy is anything but bright; shop cards carry high rates of interest and low credit limits, which can prove dangerous to a credit score if not carefully handled.
— Andrea Woroch; consumer economies pro

Significant card use at lower incomes

PricewaterCoopers lately called that consumers will spend 10 percent more during the 2016 holiday season than during 2015. … What’s a godsend for both brick-and-mortar and online retailers might be substantial bill for a lot of families.

And consider this: PwC also forecasts that “consumers with yearly household incomes less than $50,000 will probably raise their percent spending amounts even more than consumers complete.” That raised spending will certainly be billed to a charge card, meaning many families may spend the very first half of 2017 paying off their vacation generosity, plus interest.
— Ian Atkins; analyzer, Match Small Business

Substantial sums charged at high rates

This time of year, we find many members billing substantial sums of cash on credit cards with higher-than-normal rates of interest. The very best solution to pay down your debt would be to ensure you are employing a low-interest card, under 10.99 percent, when spending for the vacations.
— Dustin Jacobs; vice president of advertising, BrightStar Credit Union

After splurging, preserve

The keys to preventing the vacation credit crisis are area and intending. The preparation calls for saving all year to collect a sum that is appropriate. The area will be to quit spending when that cash is gone, irrespective of what the youngsters might ask for or the partner might expect.

The secret to recovering from the vacation credit splurge is saving. Occasions will only repeat themselves in case the economy for next year does not begin instantly. Get out of debt, although yes, the debt should be paid.
— Mike Sullivan; personal finance advisor, Take Charge America

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