Experts warn of high interest rates on credit cards amid holiday shopping season
SACRAMENTO — Financial experts are warning consumers about credit card debt amid the holiday shopping season. With the combination of inflation and high interest rates, going into debt is the last thing you want to do.
According to a recent survey by Nerdwallet, more than half of Americans will purchase holiday gifts on credit this year. Meanwhile, interest rates hit an all-time high in early November when rates hit 19.1%.
"Those rates have gotten so high and monthly payments are much higher now. I have been trying to just cut back," shopper Nathan Sands said.
Financial experts say using credit cards to purchase holiday items may be risky for some. The average American shopper will spend about $880 on holiday gifts. The average interest rate on the principal balance will be about $170. If a debt carrier is unable to make payments, it will hurt their credit.
"Your credit score is essentially your only saving grace during times like this – when inflation is so high and for getting a lower interest rate if you do need to buy a house or car," financial advisor Pam Rodriguez said.
Rodriguez said there are three ways to avoid overbuying and staying out of debt.
First, hold off on buying big items unless it's a deal of up to 40% off. Second, be frugal with shopping and limit the number of gifts you purchase to just your family. Lastly, make a list and set a limit before you shop. The goal is to avoid having to pull out your credit card at checkout.
"Go into a store with a set limit because again, we're trying to avoid paying the debt the credit card can create," Rodriguez said.