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What you need to know
- Recent data shows that household credit card and debit spending increased by 1.0% in October compared with the previous year, after a slight decline in Septembre.
- Consider debt consolidation and other tools such as budgeting apps, transfer of balances, or debt consolidation before you add to your debt.
- There are many ways to get out of debt, but the most common is by paying off a portion for a small fee or working closely with a professional credit counselor.
- You can give yourself the gift of a lower debt balance by paying down low-balanced debts first and saving some money.
The holiday season is fast approaching and even the miserliest Scrooge may be lured to spend money on presents for family members or friends. Bank of America released a study that showed credit card spending increased by 1.0% compared to last October.
Holiday spending, however, can become a burden that is difficult to manage for some people. Federal Reserve Bank of New York, in its latest report on household credit and debt, determined that balances of credit card grew by 24 billion dollars, an 8.1% increase, during the third quarter of the year 2024. Furthermore, 3.5% of outstanding debt—credit card and other forms—was in delinquency.
Consider giving your family a debt-relief gift. This can be a great way to manage debts and pay them off more quickly.
Debt Relief – How to Get it
The debt relief can take many different forms. You have many options, from working with a company that settles debt or with a credit counsellor to consolidating debt using a new credit card or loan.
Debt Relief Companies
Top debt relief firms will negotiate with creditors in order to reduce the amount you owe. The fees can range between 15% and 25% of the total debt. In the early years of 2024 Investopedia’s own research and rating project determined that National Debt Relief, Inc. was the most effective overall debt relief company. This is largely due to the fact that it charges a small fee based on the total amount settled by the company rather than a full payment.
Debt Consolidation loans
Debt consolidation loans can help you pay down multiple debts by combining them into one loan. If you qualify, debt consolidation loans allow you to consolidate multiple forms of current debt by taking out a loan that covers all or part of the aggregate balances.
Discover, with its low interest rate and fee combined with its quick funding speed was named as the overall best personal loan for consolidating debts by Investopedia in November.
Transfer credit card balance
Some financial companies offer promotional credit cards during which they will pay no interest on the balance you transfer to their card. You should pay off the balance before the promotional period expires. According to Investopedia, credit card databases show that in October average interest rates for credit cards with balance transfers ranged from 17.74% to 28.12%.
Three tips for budgeting holiday spending
Because there are some risks involved with the three kinds of debt relief mentioned above—namely fees and potentially high interest rates—you may decide that budgeting works better for your finances. It is possible to budget in a number of ways.
Open a high-yield savings account
The highest-paying high-yield accounts currently pay at least 5.00%. With the Fed starting to lower rates, many banks are also lowering their rates. These top rates won’t last forever.
Budgeting apps are a great way to keep track of your finances
Apps that track your income and spending across different categories can be a great way to manage your money. A budgeting app will sync your data with your bank in order to create your budget. The main reason budgeting is helpful is not to show you how much you’re unable to spend, but instead what money you have available.
Start with your smallest debts.
The snowball method is a way to pay off the least amount first, allowing you more cash for holiday spending with your family. You pay interest on your debt with each payment, so paying the balance off early can help avoid further interest. You will save money by using the snowball technique, and you may also gain confidence in your ability to pay off your debts.
Article Sources Investopedia asks writers to use primary resources to back up their writing. This includes white papers, official government data, reporting original and interviews conducted with industry experts. Where appropriate, we also refer to original research by other respected publishers. Learn more about how we produce accurate, unbiased material in our The editorial Policy.
Bank of America. "Consumer Checkpoint: Holiday Spending Unwrapped."
Federal Reserve Bank of New York. "Quarterly Report on Household Debt and Credit: 2024: Q3."
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