Not everyone is proactive or can afford to save for the shopping season and that is why many people end up in December with a severe balance on their cards.
According to the consumption report made by Wallethub, although 60% of those who use their credit card will pay what they owe when the monthly bill arrives, 15% will still have debt of the holiday gifts when they are preparing the spending season for Valentine’s Day in February.
Of course, it is not advisable because gifts cost much more if they are left on the card. Remember that the credit of the cards is the most expensive of all the conventional ones and that the interest rates that are paid vary from 12% around 25%. In New York, higher rates are prohibited but this is not the case in all states.
If you are buying on credit:
- Make sure you can pay your balance as soon as possible to avoid paying much more in the way of interest. If you cannot pay it once, do not stop paying the minimum for the following months to avoid further damaging your credit history.
- If you request a new card for purchases, try to be some of those that arrive with a 0% introductory offer over a period of months. This avoids having to pay interest while recovering and paying little by little. Beware, the Federal Reserve is expected to raise interest rates in December. Although there is a lot of competition from card issuers, these offers may decrease as the authorities raise the price of money.
- In case you are tempted by a credit card offer from a store, know that you are opening a line of credit and that has a negative impact on your history. Also, look at the interest charged by that card, the so-called APR, and not just the discount offer because the interest is usually higher than the generalist cards. If you want to get one of these cards consider that the discounts are only for the store that issues it while other generalist cards provide money back or points that help you save more.
Increase in delinquency
Americans have more than a trillion dollars in debt on their cards, more than before the Great Recession, and with it have started to get the delinquency that is starting to rise too.