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Americans overspent during the holidays, increasing credit card debt

Americans overspent during the holidays, increasing credit card debt
Written by Publishing Team

By many measures, 2021 saw record holiday spending despite ongoing supply chain issues, inflation and the new Covid-19 variant.

Holiday sales are on track to grow as much as 11.5% through 2020, according to estimates by the National Retail Federation.

About 30% of Americans said they overspend during gift-giving season, according to a WalletHub post-holiday survey. Although omicron led to a new wave of infections, more than half, or 56%, said Covid had not affected their plans, the survey found.

For most shoppers, increasing their spending also means relying more on credit cards or buying now, and paying later in finance to spread their expenses.

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As a result, nearly 36% of consumers went into debt, due to an average of $1,249, according to a separate survey by LendingTree.

Buy Now, Pay Later Its popularity has increased with the increase in online shopping during the pandemic; However, studies show that purchasing in installments can encourage consumers to spend more than they can afford.

Although these programs allow shoppers to split their purchases into equal payments, often without interest, there may be late fees, deferred interest, or other penalties if you miss a payment.

On the other hand, credit cards are among the most expensive methods of borrowing, with interest rates over 16% on average. If you have bad credit, you’ll pay more: Nearly a quarter of borrowers had an APR between 20% and 29%, LendingTree found, while 9% had an APR above 30%.

Card balances typically decline at the beginning of the year as borrowers make their purchases while on vacation.

However, as 2022 begins, credit card balances are expected to rise further as consumers continue to increase their spending, according to separate forecasts by TransUnion.

Most consumers said paying down debt will be a challenge this year. In fact, 82% of those with vacation debt won’t pay it off within a month, LendingTree found, despite the high interest fees.

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